Celebrity ICO Endorsement Crackdown: Floyd Mayweather, DJ Khaled Face Music from the SEC
The pro boxer and the music producer have been charged by the regulator for promoting ICOs without disclosing payments received.
Professional boxer Floyd Mayweather and American DJ and music producer Khaled Mohamed Khaled had used their influence to pump up initial coin offerings (ICOs) without revealing to investors that they had been paid a promotional fee.
The U.S. Securities and Exchange Commission (SEC) accused both celebrities of violating a federal law that requires individuals who are advertising investments to disclose that they are being paid to do so.
Both men will have to shell out hundreds of thousands of dollars in penalties and interest to settle the charges. The information was released earlier by the SEC on its website.
Stephanie Avakian, Enforcement Division Director, said:
These cases highlight the importance of full disclosure to investors. With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.
The ICOs Promoted
Mayweather and DJ Khaled are accused of advancing the token sale of Centra, a Miami-based firm which raised $32 million through an ICO last year.
According to the SEC, Floyd Mayweather, while touting Centra’s ICO, tweeted, “It starts in a few hours. Get yours before they sell out, I got mine.” DJ Khaled reportedly called it a “game changer” on his social media accounts.
Mayweather, it is reported, was paid a $100,000 promotional fee by Centra Tech Inc., while Khaled was paid $50,000. Both did not disclose it while publicizing the ICOs.
The SEC said that it was the first time that the regulator had cracked down on individuals found to be in violation of the norms. The regulator has repeatedly been warning that tokens sold in ICOs may be securities and that those offering them need to comply with federal securities laws.
Mayweather, according to the article, also did not disclose a $200,000 fee that he received to promote two other ICOs.
Mayweather will shell out $300,000 in disgorgement, $300,000 in penalties, and $14,775 in interest. Khaled will pay $50,000 in disgorgement, a $100,000 penalty, and $2,725 in interest. Both settled the charges without admitting or refuting them.
Under the settlement, Mayweather will not promote securities for three years and Khaled for two years. Both have also agreed to cooperate with the ongoing investigations.
The founders of Centra were also slapped with civil charges by the SEC earlier this year. They are accused of running a fraudulent ICO. The Justice Department also filed criminal charges against Centra.
The action against both public figures should act as a deterrent against this practice by ICOs of leveraging celebrities to fleece gullible investors.
What are your thoughts about the action against Mayweather and DJ Khaled? Let us know in the comments below.
Images courtesy of Shutterstock and LBN archives.
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