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US SEC Charges Floyd Mayweather and DJ Khaled For Illegal Promotion of Fraudulent ICO

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ICO and ICOs

The United States Security and Exchange Commission has charged two celebrities, Floyd Mayweather and DJ Khaled for illegally promoting fraudulent ICOs.

In a press release on Thursday, the professional boxer and music artist DJ Khaled have been penalized by the SEC for failure to disclose promotional payments alleged to have been received from fraudulent ICOs. Both celebrities boasted on social media that these were “game changing” investments.

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Mayweather was alleged to have received $300,000 in payments for endorsing three ICOs, including $100,000 received from ICO Centra Tech. On the other hand, Khaled was alleged to have received $50,000 for promoting Centra Tech., which he twitted was a “game changer” in a deleted post in September 2017.

These reactions from SEC came after issuing the 2017 DAO Report, which warned that “coins sold in ICOs maybe securities,” and that those who offer to sell securities in the US must comply with Federal Securities laws. However, neither Mayweather nor Khaled got that message and acted accordingly. In the words of the Enforcement Division Co-Director Stephanie Avakian:

“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 unbiased, rather than paid endorsements”

Notwithstanding, 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. Mayweather also agreed to continue to cooperate with the investigation. On this issue, another Enforcement Division Co-Director Steven Peikin cautioned:

“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.”

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