These two cases are the first precedent of the US Securities and Exchange Commission, which concerns law violation that is connected with promotion of initial coin offerings. The Commission points that involvement of celebrity endorsers was an essential part of the strategy, exercised by the token sellers.
According to the SEC’s statement released yesterday, on Nov 29, both Mayweather and Khaled did not reveal the fact of receiving money for the promotion of various token sales.
As for Mayweather’s case, the Commission has established that the boxing champion failed to report promotional settlements obtained from three different issuers of initial coin offerings, including 100,000 USD payment from digital currency project Centra Tech Inc.
Earlier in April, the Commission found the creators of Centra Tech guilty of securities scam. The securities watchdog accused Sohrab Sharma and Rober Farkas of gathering over 32 million dollars via a fake coin offering, advertised by both Mayweather and DJ Khaled.
The Commission has also established that the boxer did not report his 200,000 USD payment for promotion of two other initial coin offerings.
Mayweather was actively engaged in the promotion of coin offerings using his social media accounts, such as Instagram and Twitter, which are followed by millions of his fans.
Mayweather settled 300,000 dollars’ worth of penalties, as well as 14,775 USD pre-judgment interest, although, interestingly, refrained from admission or denial of any illegal actions. Furthermore, he agreed to keep from advertising any securities for the period of three years.
Another case led by SEC saw DJ Khaled accused of withholding the information about being paid 50,000 USD by Centra Tech, whose coin offering he also actively advertised using his accounts on various social media.
Khaled settled 100,000 USD worth of penalties, 50,000 USD in disgorgement, and 2,725 USD more for pre-judgment interest. The music producer was also forbidden from advertising any securities for the period of two years.
According to the Commission, the celebrities had to reveal the fact of being paid for ICO promotion in order to reveal the biased nature of their endorsements to their followers.