DJ Khaled, a music producer, and the famous boxer, Floyd Mayweather, have been sanctioned by the United States Securities and Exchange Commission for advertising initial coin offerings without disclosing that they were paid to do so.
The Two Have Agreed To Pay Fines
According to a report released by the Securities and Exchange Commission, Mayweather will part with more than $600,000 while Khaled has agreed to pay more than $150,000. The regulator accused the two celebrities of hyping an initial coin offering on social media platforms without publicly declaring that the firms paid them to promote the ICOs.
Companies are shifting from selling shares but instead have embraced initial coin offerings in which they sell digital tokens. To attract bigger investment companies have sought endorsements from celebrities. The increase in ICOs has also been fueled by the price of Bitcoin which touched record highs in 2017.
In the same year, the Securities and Exchange Commission announced that hyping of ICOs is illegal if those backing them do not disclose how much the firms paid them to support the initial coin offerings.
However, it’s the first time the SEC is imposing fines on individuals involved with illegally advertising initial coin offerings.
The SEC argues that:
“With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have been appeared to be unbiased, rather than paid endorsements.”
Even though the two celebrities agreed to settle with the SEC, they did not deny or acknowledge the allegations brought against them by the Securities and Exchange Commission.
Mayweather and Khaled were accused of hyping an ICO backed by Centra Tech Inc, a company which claimed that it is seeking funds to develop a cryptocurrency debit card.
The company’s founders were arrested in the United States in April after collecting more than $25 million from investors. Centra misled investors by claiming a partnership with Mastercard and Visa.
The Securities and Exchange Commission categorizes most of the initial coin offerings as securities, and thus the regulator has to approve before they are sold to prospective investors. Apart from those unlawfully hyping ICOs, the SEC has put firms issuing the ICOs under scrutiny.