ICOs are not known as the Wild West of the cryptocurrency Sector without reason. The world of Initial Coin Offerings (ICOs) is proving to be risky territory for the celebrities who promote these coins. The Securities and Exchange Commission (SEC) announced today that they had settled charges against music producer DJ Khaled and Floyd Mayweather, a professional boxer.
First SEC Case Against Celebs
For the first time, the SEC has settled charges against celebrities in violation of their rules involving ICOs. According to the SEC orders, Mayweather failed to disclose the payments he received for the promotion of three ICOs. Mayweather received over $100,000 from Centra Tech Inc. to promote the Centra ICO, which in a tweet he said:
“Starts in a few hours. Get yours before they sell out, I got mine…”
Mayweather went on to say on social media that he should be called “Floyd Crypto Mayweather from now on.” He was paid another $200,000 to promote two other ICOs according to the SEC.
DJ Khaled, on the other hand, did not disclose over $50,000 he received in payments from the same company, Centra Tech. On his social media accounts, Khaled called the Centra ICO a “game changer.”
Stephanie Avakian, co-director of the Enforcement Division said:
“These cases highlight the importance of full disclosure to investors. With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.”
What Happens Next?
The promotions from both the celebrities came after the SEC issued its DAO report in 2017. The regulator said that the ICO coins could be deemed as Securities and therefore, issuers and promoters of these coins must comply with federal securities laws. Similarly, criminal charges were filed by the U.S. Attorney’s Office for the Southern District of New York. Mayweather and Khaled didn’t comment on the findings and agreed to pay the disgorgement along with the penalties and interest.
Mayweather has agreed to pay $300,000 in disgorgement, along with a $300,000 penalty and $14,775 prejudgment interest. Khaled has agreed to pay $50,000 in disgorgements, a penalty of $100,000 and $2,727 in prejudgment interest. Both the celebrities have agreed not to promote any kind of Securities. The ban will apply for three years on Mayweather and two years on Khaled.