Famous boxer, Floyd Mayweather and music producer, DJ Khaled took some time off their respective careers to promote ICOs. However, this move has been marked by the SEC as a “violation” since both men failed to disclose their earnings for selling “securities” to the investors.
According to a CNBC update on Nov 29, the celebrities promoted an ICO belonging to Centra Tech Inc. on their social media handles which have millions of followers. Mayweather and Dj Khaled have a combined 11 million+ followers on Twitter alone.
The pro-boxer tweeted about Centra’s ICO public token sale with the message “starts in a few hours. Get yours before they sell out, I got mine." Dj Khaled labeled the project being done by Centra as a “game changer” on his social media accounts.
Centra paid Mayweather and Khaled $100,000 and $50,000 respectively for the promotion which likely led to the sell of their ICO tokens.
Non-Compliant Securities Promotion
In an earlier notice, the SEC had warned individuals to be cautious while investing in ICOs backed by celebrities because the personalities may not have enough knowledge to determine whether the projects are competent.
Given that the SEC had tagged ICO tokens as “securities”, it was expected that the celebrities comply with federal securities law. The law says to disclose money realized from promoting securities” to investors since such persons (promoters) are working as brokers.
But the celebrities failed to do this, with Mayweather going one step ahead to promote two other unnamed ICOs for $200,000. To add salt to injury, the SEC had earlier charged Centra founders for creating a fraudulent ICO, so it can practically be said that the celebrities collected money to promote a fake project.
As per the report, Floyd Mayweather and Dj Khaled have allowed settlement of the charges without denying or accepting the findings of the SEC.
SEC Impose $767,501 in Fines + Ban
For failing to comply with securities law, the U.S SEC has asked Floyd Mayweather to pay $300,000 in disgorgement, $300,000 as a penalty and $14,755 in interests. Also, he will cooperate with the regulators for further investigations and stay away from promoting securities in the next three years.
Dj Khaled faces a more favorable penalty with $50,000 to be paid for disgorgement, $100,000 as a penalty and $2725 in interest. He will also face a two-year ban from promoting securities.