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The U.S. Securities and Exchange Commission last week announced that it has settled charges against two world-renowned celebrities – professional boxer Floyd Mayweather Jr. and music producer Khaled Khaled (aka DJ Khaled) – for failing to disclose payments they received for promoting investments in Initial Coin Offerings (ICOs).
According to the SEC’s orders, Mayweather failed to disclose promotional payments from three ICO issuers, including $100,000 from Centra Tech and $200,000 from the other two ICOs, and Khaled failed to disclose a $50,000 payment from Centra Tech. These are the SEC's first cases to charge touting violations involving ICOs.
Both Mayweather and Khaled promoted these ICOs through their social network accounts. The promotions came after the SEC issued its DAO Report in 2017 warning that coins sold in ICOs may be securities and that those who offer and sell securities in the U.S. must comply with federal securities laws. In April 2018, the SEC filed a civil action against Centra’s founders, alleging that the ICO was fraudulent. The U.S. Attorney's Office for the Southern District of New York filed parallel criminal charges.
According to the SEC’s official release, Mayweather and Khaled, without admitting or denying the findings, have agreed to pay disgorgement, penalties and interest, totaling $614,775 and $152,725 respectively. In addition, Mayweather has agreed not to promote any securities, digital or otherwise, for three years, and Khaled agreed to a similar two-year ban. Mayweather also agreed to continue to cooperate with the investigation.
"Investors should be skeptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements," said Enforcement Division Co-Director Steven Peikin. "Social media influencers are often paid promoters, not investment professionals, and the securities they’re touting, regardless of whether they are issued using traditional certificates or on the blockchain, could be frauds."
A number of celebrities have entered the crypto space and have been backing a number of blockchain and cryptocurrency projects. Recently, Johnny Depp inked a deal with TaTaTu, a blockchain-powered social entertainment platform founded by Andrea Iervolino, a Hollywood film producer and co-founder and CEO of AMBI Media Group. Ashton Kutcher is an investor in bitcoin payment processor BitPay. In the past, Jamie Foxx has endorsed ICO of Cobinhood. Actress Gwyneth Paltrow last year joined crypto wallet startup Abra as an advisor. In 2017, Sirin Labs roped in football megastar Lionel Messi as a brand ambassador for its recently launched FINNEY blockchain smartphone.
