SEC Charges Floyd Mayweather Jr And DJ Khaled With Unlawfully Touting ICOsbr>
The US Securities and Exchange Commission (SEC) has fined professional boxer Floyd Mayweather Jr. and music producer DJ Khaled for “unlawfully touting” initial coin offerings (ICO).
According to the SEC, Mayweather failed to disclose promotional payments from three ICO issuers, including $100,000 from Centra Tech, while Khaled failed to disclose a $50,000 payment from Centra Tech. Both celebrities promoted Centra’s ICO on their social media accounts. Khaled called it a “game changer” while Mayweather encouraged his followers to get in on the ICO, saying he’d taken part.
Without admitting or denying the findings, 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. Mayweather also agreed to continue to cooperate with the investigation.
“These cases highlight the importance of full disclosure to investors,” said Enforcement Division Co-Director Stephanie Avakian. “With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.”
Centra, which raised more than $32 miillion from thousands of investors in 2017, promised its investors that the funds raised in the ICO would be used to build a suite of financial products, including a debit card backed by Visa and Mastercard that would enable users to convert thinly-traded cryptocurrencies into US dollars. However, the SEC found that Centra had no relationship with Visa and Mastercard and declared that the company’s ICO was a fraud.
In addition to paying celebrities to tout the fraudulent ICO on social media, Centra founders, Sam Sharma and Robert Farkas, reportedly created fictional executives and posted false or misleading marketing materials to Centra’s website.
SEC Enforcement Division Co-Director Steven Peikin said that investors should be skeptical of investment advice posted to social media platforms, and 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,” Peikin said.