SEC Warns Celebrities To Disclose Their Compensation For ICO Touts

Crime, ICO News, News | November 2, 2017 By:

The US Securities and Exchange Commission has warned celebrity initial coin offering (ICO) endorsers that they may be breaking the law if they don’t disclose compensation for their touts.

Boxing champion Floyd Mayweather, rapper Ghostface Killah, and celebutant Paris Hilton are among the prominent names who have gotten behind recent ICOs, and that has apparently caught the eye of the SEC Enforcement Divsion and Office of Compliance Inspections and Examainations.

The SEC issued a public memo warning of consequences. “Celebrities and others are using social media networks to encourage the public to purchase stocks and other investments,” said the memo. ” These endorsements may be unlawful if they do not disclose the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement.  The SEC’s Enforcement Division and Office of Compliance Inspections and Examinations encourage investors to be wary of investment opportunities that sound too good to be true.  We encourage investors to research potential investments rather than rely on paid endorsements from artists, sports figures, or other icons.”

ICO investments have now topped $3 billion this year, and the SEC has indicated that many of the tokens sold are, in fact, securities. That makes them subject to the same laws as any public stock offering.

“Any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion.  A failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws.  Persons making these endorsements may also be liable for potential violations of the anti-fraud provisions of the federal securities laws, for participating in an unregistered offer and sale of securities, and for acting as unregistered brokers.  The SEC will continue to focus on these types of promotions to protect investors and to ensure compliance with the securities laws.”