SEC Charges Floyd Mayweather, DJ Khaled For Promoting ICOs Without Disclosing Payments
The Securities and Exchange Commission on Thursday brought their first cases in initial coin offering violations, charging boxer Floyd Mayweather Jr. and music producer DJ Khaled for not disclosing payments they received for promoting ICOs.
Both celebrities used social media in 2017 to promote a cryptocoin called Centra, but neither disclosed that they were getting paid to promote the coin — a violation of federal law, according to the SEC.
Listen to GHOGH with Jamarlin Martin | Episode 24: Delane Parnell
Jamarlin talks to prodigy Delane Parnell, founder and CEO of high-school esports company PlayVS, which just raised a $15M series A round.
Mayweather was paid $100,000 from Centra Tech Inc. and Khaled earned $50,000.
Neither admitted nor denied the findings, Marketwatch reported.
Mayweather agreed to pay $300,000 in disgorgement (the money he made for promoting the coin) plus 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, according to the SEC.
Cryptocurrency startup Centra Tech seemed to be a company on the rise, raising $32 million via an ICO. Then in late March, things went horribly wrong. Two of the startup’s founders were arrested. Sohrab “Sam” Sharma and Robert Farkas — who was trying to flee the country when he was detained — were charged with perpetrating a fraudulent ICO by the SEC, which accused them of raising millions of dollars by selling “unregistered securities.”
Floyd and Khaled both settled their cases behind closed doors, TMZ reported. Mayweather agreed to not promote any kind of currency for the next three years. Khaled agreed to hold off for two years.
The SEC issued a report in 2017 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. In April 2018, the SEC filed a civil action against Centra’s founders, alleging that the ICO was fraudulent:
“Investors should be skeptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements,” said Steven Peikin, Co-Director of SEC Enforcement . “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.”
JUST IN: SEC charges Floyd Mayweather, DJ Khaled for promoting ICOs without disclosing payments – CNBC
— Breaking911 (@breaking9111) November 29, 2018
Sign up for the Moguldom newsletter — business news you need to know about economic empowerment for the digital age, delivered to your inbox.