The Securities and Exchange Commission (SEC) has announced settled charges against professional boxer Floyd Mayweather Jr. and music producer DJ Khaled for their failure to disclose payments they received for promoting Initial Coin Offerings (ICOs).
The charges against the two celebrities are the first cases to charge promoting violations involving ICOs.
The SEC found that Mayweather failed to disclose promotional payments from three ICO issuers, while Khaled never disclosed a $50,000 payment from Centra Tech, which he promoted on his social media accounts as a “game changer.” And a post on Mayweather’s Instagram account predicted he would make a large amount of money on another ICO, while a post to Twitter said: “You can call me Floyd Crypto Mayweather from now on.”
Without admitting or denying the charges, Mayweather agreed to pay $300,000 in disgorgement, a $300,000 penalty, and $14,775 in prejudgment interest, while Khaled will pay $50,000 in disgorgement, a $100,000 penalty, and $2,725 in prejudgment interest.
In addition, both men agreed not to promote any securities, digital or otherwise, for three years. Mayweather also agreed to cooperate with the investigation, which is ongoing.
“These cases highlight the importance of full disclosure to investors,” Enforcement Division co-director Stephanie Avakian said in a press release. “With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.”
“Investors should be skeptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements,” added Enforcement Division co-director Steven Peikin. “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.”