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American celebrities charged with ICO fraud

Both of them agreed to pay disgorgement, penalties, and interest

American celebrities charged with ICO fraud. Source:  shutterstock.com

The Securities and Exchange Commission announced settled charges against professional boxer Floyd Mayweather Jr. and music producer DJ Khaled, for failing to disclose payments they received for promoting investments in Initial Coin Offerings. These are the SEC’s first cases to charge touting violations involving ICOs.

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.” 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 came after the SEC issued its DAO Report in 2017 warning that coins sold in ICOs may be securities and that those who offer and sell securities in the U.S. must comply with federal securities laws. In April 2018, the Commission filed a civil action against Centra’s founders, alleging that the ICO was fraudulent. The U.S. 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.

The SEC’s investigation is continuing.

SEE ALSO: How to read a cryptocurrency white paper

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