Professional boxer Floyd Mayweather Jr. and music producer DJ Khaled have been charged by the United States Securities and Exchange Commission for illegally advertising Initial Coin Offerings.
According to a press release published on 27 November, Mayweather did not disclose promotional payments they received for promoting investments from three ICO issuers, including $100,000 from Centra Tech, a cryptocurrency start up.
DJ Khaled, on the other hand, , failed to disclose $50,000 payment from the same company, which he touted on his social media accounts as a “game changer.”
Without admitting or denying the findings, Mayweather and Khaled agreed to pay disgorgement, penalties and interest. Mayweather agreed to pay $300,000 in disgorgement, a $300,000 penalty, and $14,775 in prejudgment interest.
Khaled agreed to pay $50,000 in disgorgement, a $100,000 penalty, and $2,725 in prejudgment interest.
In addition, Mayweather agreed not to promote any securities, digital or otherwise, for three years, and Khaled agreed to a similar ban for two years.
In April, Centra Tech three co founders — Sohrab Sharma, Robert Farkas, and Raymond Trapani — were arrested and charged with securities and wire fraud of more than $25 million associated with the company’s ICO.
Mayweather and Khaled’s promotions came after the SEC issued a 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.
Speaking on the issue, Enforcement Division Co-Director Steven Peikin advised Investors to be skeptical of investment advice posted to social media platforms.
“Investors should not make decisions based on celebrity endorsements, 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,” he said.
