This is the very first time SEC charged people for touting violations involving ICOs.
Mayweather failed to disclosed payments from three ICO issuers, including a $100,000 (£78,348, €87,972) payment from Centra Tech. Khaled also received money from Centra Tech – reportedly $50,000 – and he went on to his social media accounts describing the company as a “game changer”, the SEC reported.
Mayweather also used Twitter to urge his followers to buy Centra’s ICOs. He also raved on Instagram about how much money he was going to make and promoted another ICO on Twitter. He failed to disclose a total of $200,000 that he was paid to promote the two ICOs.
Details of the third ICO issuer were not disclosed.
Fines were agreed
Both Mayweather and Khaled agreed to pay disgorgement, penalties and interest, but did not admit or deny SEC’s findings.
Mayweather will pay $300,000 in disgorgement, a $300,000 penalty and $14,775 in pre-judgement interest.
Similarly, Khaled will pay $50,000 in disgorgement, a $100,000 penalty and $2,725 in pre-judgement interest.
Both have agreed not to promote any securities, digital or otherwise, for three and two years for Mayweather and Khaled respectively.
First case for US prompts security enforcement
“These cases highlight the importance of full disclosure to investors,” said Stephanie Avakian, enforcement division co-director at SEC. “With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.”
Steven Peikin, enforcement division co-director at the SEC, 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.”
Mayweather and Khaled were the first celebrities to be hit with fines but they were not the first to incur the wrath of the SEC for promoting ICOs.
In November 2017, the US watchdog was forced to act after socialite Paris Hilton tweeted about a coin offering.
“A celebrity endorsement does not mean that an investment is legitimate or that it is appropriate for all investors,” the US regulator warned at the time.
“It is never a good idea to make an investment decision just because someone famous says a product or service is a good investment. Celebrities, like anyone else, can be lured into participating (even unknowingly) in a fraudulent scheme.”