Securities regulators in the United States have fined two celebrities who were found to have failed to disclose that they were paid to promote initial coin offerings (ICOs).
Professional boxer Floyd Mayweather Jr. and music producer DJ Khaled were knocked out by an order from the U.S. Securities and Exchange Commission (SEC) to pony up $614,775 and $152,745 respectively to settle their charges of illegal promotion of ICOs.
SEC took action against the two celebrities after it closed down Centra, a cryptocurrency platform that reportedly scammed investors millions of dollars. Upon investigation, SEC discovered that Mayweather J. and DJ Khaled were used to promote the platform.
Centra’s founders, Sam Sharma and Robert Farkas, promoted their fraudulent ICO through a flashy website featuring endorsements from various celebrities. According to reports, the celebrities were paid to promote the ICO, and the company raised more than $32 million from investors in 2017.
During the crowdsale, Centra promised its investors that the funds raised would be used to build a suite of financial products which included a debit card backed by Visa and Mastercard. These cards would purportedly enable users to convert cryptocurrencies into U.S. dollar. Upon investigation, SEC uncovered that the company had no relationship with Visa and Mastercard.
SEC did not indict Mayweather and DJ Khaled with fraud, since it believes that the two were also deceived, along with the investors. However, they decided to penalize the celebrities since they failed to inform members of the public that they were paid to promote the ICO.
Mayweather Jr. promoted a total of three ICOS. According to reports, the pro boxer received $100,000 from Centra and another $200,000 from the other two ICOs. The Mayweather Jr. mainly promoted the ICOs using his social media platforms, Instagram and Twitter, where he has millions of followers. Mayweather has agreed to pay the SEC a penalty fee of $300,000 and $ 14,775 in prejudgment interest.
DJ Khaled promoted Centra Tech through his social media accounts and was paid $50,000. DJ Khaled struck a deal with the SEC, which involves him paying $100,000 as penalty fee and $2,725 in prejudgment.
There is no doubt that ICOs will continue to seek celebrities and prominent people in the communities to help promote their ICO. To avoid conflicting with authorities, SEC advises celebrities to know what they are endorsing and always disclose relevant facts to the public.
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