Professional boxer, Floyd Mayweather Jr. and music producer, DJ Khaled are in hot water over allegations made against them of unlawfully promoting Initial Coin Offerings (ICOs). Both men failed to disclose payments they received for promoting investments in ICOs and therefore had charges levelled against them by the Securities and Exchange Commission (SEC).
According to an official press release, these are the SEC’s first cases to charge touting violations involving ICOs seeing as both parties used social media accounts from Twitter and Instagram to promote the ICOs.
Mayweather endorsed Centra, whose founders are facing federal fraud charges, for an amount of $100,000. Similarly, DJ Khaled was paid $50,000 to endorse the same company.
The SEC issued its DAO Report in 2017, after which came Mayweather and Khaled’s promotions, 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. The Commission filed a civil action against Centra’s founders in April of 2018, alleging that the ICO was fraudulent.
Both Mayweather and Khaled agreed to pay disgorgement without admitting or denying any of the findings, resulting in Mayweather paying $300,000 in disgorgement, a $300,000 penalty, and $14,775 in prejudgment interest. Khaled also agreed to pay disgorgement to the total of $50,000, a $100,000 penalty, and $2,725 in prejudgment interest.
“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.”
By Daniëlle Kruger
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