Boxer Floyd Mayweather Jr. and music producer DJ Khaled have been hit with fines totalling more than $1 million for unlawfully spruiking dodgy cryptocurrencies.
The Securities and Exchange Commission announced Thursday it had settled charges against the pair for failing to disclose payments they received for promoting so-called “initial coin offerings” last year.
“Centra’s ICO starts in a few hours,” Mayweather wrote to his nearly eight million Twitter followers in September. “Get yours before they sell out, I got mine.”
A post on his Instagram account, where he has 21 million followers, predicted he would make a large amount of money on another ICO. Another post to Twitter said, “You can call me Floyd Crypto Mayweather from now on.”
Centra’s (CTR) ICO starts in a few hours. Get yours before they sell out, I got mine https://t.co/nSiCaZ274l pic.twitter.com/dB6wV0EROJ
— Floyd Mayweather (@FloydMayweather) September 18, 2017
I just received my titanium centra debit card. The Centra Card & Centra Wallet app is the… https://t.co/iIbQwQCwD1
— DJ KHALED (@djkhaled) September 27, 2017
According to the SEC, Mayweather received approximately $US300,000 for promoting three ICOs on his social media channels, including $US100,000 from Centra Tech.
Earlier this year, the SEC filed civil action against the founders of Centra Tech alleging the ICO was fraudulent. The US Attorney’s Office for the Southern District of New York has filed parallel criminal charges.
DJ Khaled, real name Khaled Khaled, was allegedly paid $US50,000 by Centra Tech for promotional posts to his 12.4 million Instagram and 3.9 million Twitter followers featuring himself holding a “Centra Card”.
“I just received my titanium centra debit card,” he wrote. “The Centra Card & Centra Wallet app is the ultimate winner in Cryptocurrency debit cards powered by CTR tokens! Use your bitcoins, ethereum, and more cryptocurrencies in real time across the globe. This is a Game changer here. Get your CTR tokens now!”
According to the SEC, without admitting or denying the findings, Mayweather and Khaled agreed to pay $US614,775 ($840,000) and $US152,725 ($210,000) in penalties.
In addition, Mayweather has 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 co-operate with the investigation.
“These cases highlight the importance of full disclosure to investors,” said SEC enforcement division co-director Stephanie Avakian said in a statement.
“With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.”
Enforcement division co-director Steven Peikin added, “Investors should be sceptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements.
“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.”
Initial coin offerings, a form of capital raising often used by cryptocurrency start-ups, have come under heavy scrutiny from regulators including the SEC and the Australian Securities and Investments Commission.
Regulators have warned that “coins” sold in ICOs may be securities and as such those offering and selling them must comply with securities laws.
Last month, an Australian crypto start-up that was promoted by cricketer Michael Clarke in a move widely panned online folded after ditching plans for a $50 million ICO, following queries from ASIC.
In February, an analysis of ICOs from 2017 found 531 out of 902 projects had either failed or “semi-failed” — a rate of 59 per cent. In March, an even more scathing report by Satis Group concluded that a whopping 81 per cent of ICOs were outright frauds.