The Securities and Exchange Commission (SEC) has charged Music producer DJ Khaled and boxer Floyd Mayweather Jr. for their roles in promoting investments in initial cryptocurrency coin offerings (ICOs) without disclosing they were paid.
According to the SEC the cryptocurrency coin sold in initial coin offerings (ICOs) may be considered as securities and subject to federal securities laws.
Both Khaled and Mayweather had entered an agreement with the SEC not to promote any securities, even digital ones, for two years and three years, respectively, the SEC said.
More so, they had agreed to give the money they received to the SEC and also pay penalties and interest.
Mayweather failed to disclose that he had received $300,000 from three different ICO issuers, including $100,000 from Centra Tech. Khaled failed to disclose a payment of $50,000 from the same company.
Both Mayweather and Khaled promoted Centra’s ICO on social media using their accounts. Khaled called it a “game changer” while Mayweather encouraged his followers to get in on the ICO, saying he had taken part.
Mayweather also commented on another ICO, saying he was going to make a lot of money.
“You can call me Floyd Crypto Mayweather from now on,” he tweeted.
The SEC, which has made it clear that ICOs can be fraudulent, warned prospective investors to be wary of ICOs that are endorsed by celebrities.
“With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements,” said SEC Enforcement Division co-director Stephanie Avakian.
“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,” said Steven Peikin, another SEC enforcement division co-director.
This is the first time the SEC has brought charges against individuals for promoting ICOs and the investigation is ongoing.
More so, Centra have been separately charged by SEC, which accused it of fraudulent ICOs.