Floyd Mayweather Jr. and DJ Khaled were fined hundreds of thousands of dollars by the U.S. Securities and Exchange Commission last week for failing to disclose that they were being paid to promote cryptocurrency investments, per reports.
The boxer and music promoter promoted Initial Coin Offerings (ICOs) without revealing issuers were paying them, the SEC said in a press release. It’s the first cases involving violations with the ICOs.
Companies looking to launch a new cryptocurrency use ICOs to raise funds from investors using traditional or digital currency, who in return get cryptocurrency tokens, per Investopedia.
“The SEC’s orders found that Mayweather failed to disclose promotional payments from three ICO issuers, including $100,000 from Centra Tech Inc., and that Khaled failed to disclose a $50,000 payment from Centra Tech, which he touted on his social media accounts as a Game changer,’” read the statement in part.
In May, the co-founders of Centra Tech, Sohrab “Sam” Sharma, Robert Farkas and Raymond Trapani, were indicted on federal fraud charges, according to EWN.
“Investors should be skeptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements,” said 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.”
The men have not addressed the allegations made against them, but they have agreed to pay the fines. Mayweather has to pay $300,000 in disgorgement, a $300,000 penalty and $14,775 in interest. Khaled must pay $50,000 in disgorgement, a $100,000 penalty and $2,725 in prejudgment interest.
“These cases highlight the importance of full disclosure to investors,” said Enforcement Division Co-DirectorStephanie Avakian. “With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.”