Numerous celebrities have gotten caught up in promoting cryptocurrency, getting big money to endorse virtual currency companies on their social media accounts. But a few have declined to disclose this promotion, and the Securities and Exchange Commission (SEC) is hitting them with big fines.
ICO’s to Be Treated Like IPO’s
The SEC announced they are treating Initial Coin Offerings (ICO’s) the same way they treat Initial Public Offerings (IPO’s) for securities. As such, the SEC announced in 2017 that ICO’s must comply with all federal security laws, including full disclosure to investors. However, Floyd Mayweather and DJ Khaled failed to report their ICO endorsement earnings to the SEC, and now they have the dubious honor of being the first cases of touting violations involving ICO’s with the SEC. According to Enforcement Division Co-Director Stephanie Avakina, “With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.”
Floyd Mayweather to Pay SEC Over $600,000
The SEC fined Floyd Mayweather $600,000 for failing to report his ICO cryptocurrency endorsements to the SEC. Centra Tech Inc. paid Mayweather $100,000 to promote its product on social media during the summer of 2017.
Mayweather wrote in an Instagram post that he was “spending bitcoins and ethereum and other types of cryptocurrency in Beverly Hills with my Titanium Centra Card.” He then encouraged his millions of followers to “join Centra’s ICO on Sept. 19th.” Centra went on to face fraud charges. Floyd also endorsed two other ICO’s that paid Mayweather another $200,000. In one of those endorsements, he is quoted as saying, “You can call me Floyd Crypto Mayweather from now on.” Under the settlement, Mayweather will give the SEC the $300,000 in earnings, plus a $300,000 penalty, plus interest.
Other Celebrities Endorsing ICO’s
Music producer DJ Khaled was also fined by the SEC. He too was paid $50,000 to endorse Centra’s ICO and did not report the earnings. Khaled will relinquish the $50,000 in earnings as well as pay a $100,000 penalty plus interest. In their settlement, both Mayweather and Khaled did not admit to any wrongdoing.
Time will tell if the SEC will file charges against other celebrities that endorsed virtual currencies last fall, including Paris Hilton and Lionel Messi. Some suspect that the investigations the SEC is putting on these endorsements have put a damper on ICO’s, though it may also be due to the recent steep decline in virtual currency prices.