Two celebrities – professional boxer Floyd Mayweather Jr. and music producer Khaled Khaled, known as DJ Khaled – have between them paid over $700,000 to settle charges in the first cases to be brought by the Securities and Exchange Commission (SEC) related to unlawfully touting initial coin offerings (ICOs), reports Accountancy Daily.
The US regulator said Mayweather failed to disclose promotional payments from three ICO issuers, including $100,000 from Centra Tech, while Khaled failed to disclose a $50,000 payment from the same company which he touted on his social media accounts as a ‘game changer.’
Mayweather’s promotions included a message to his Twitter followers that Centra’s ICO ‘starts in a few hours. Get yours before they sell out, I got mine’.
A post on Mayweather’s Instagram account predicted he would make a large amount of money on another ICO and a post to Twitter said: ‘You can call me Floyd Crypto Mayweather from now on.’
The SEC order found that Mayweather failed to disclose that he was paid $200,000 to promote the other two ICOs.
Mayweather and Khaled’s promotions followed a warning from the SEC in 2017 that coins sold in ICOs may be securities and that those who offer and sell securities in the US 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. The US Attorney’s Office for the Southern District of New York filed parallel criminal charges.
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.
Stephanie Avakian, SEC enforcement division co-director, 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.