By Ben Bain
(Bloomberg) --Boxer Floyd Mayweather and music producer DJ Khaled were accused of failing to disclose payments they received for hyping initial coin offerings, making them the biggest names sanctioned in U.S. regulators’ months long crackdown on digital-token misconduct.
Mayweather, one of the his sport’s most recognizable personalities, agreed to pay more than $600,000 to settle with the Securities and Exchange Commission, the agency said in a Thursday statement. Khaled will pay more than $150,000. Both were accused of violating securities laws by touting ICOs on social media without disclosing the coins’ backers had paid them to promote the tokens.
Celebrity endorsements of ICOs -- in which companies raise money by selling digital tokens instead of shares -- became increasingly common as Bitcoin surged to a record high late last year. All the hype prompted the SEC to warn last November that pitches could be unlawful if famous backers’ compensation wasn’t disclosed. The Mayweather and Khaled cases are the first SEC punishments against individuals over the illicit touting of ICOs.
"These cases highlight the importance of full disclosure to investors," Stephanie Avakian, the SEC’s co-enforcement director, said in the statement. “With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.”
DJ Khaled
Neither Mayweather nor Khaled admitted or denied the SEC’s allegations. Lawyers for the men didn’t immediately return phone calls seeking comment.
A company involved in both enforcement actions is Centra Tech Inc., which claimed it planned to create a virtual-currency debit card. In April, U.S. authorities arrested Centra Tech’s founders, and the SEC accused the company of illegally raising more than $25 million through an ICO by falsely claiming that it had entered into partnerships with Visa Inc. and Mastercard Inc.
In September 2017, Mayweather posted a picture of himself holding his boxing title belts on his Twitter account with the caption: “Centra’s (CTR) ICO starts in a few hours. Get your before they sell out, I got mine..."
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
Also in September 2017, Khaled hyped “the Centra Card" and “Centra Wallet” through his Instagram and Twitter accounts.
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
Neither Mayweather nor Khaled mentioned that Centra Tech was paying them, the SEC said.
The SEC’s repeated warnings that ICOs are susceptible to fraud hasn’t stopped the industry from raising billions of dollars. The SEC has said it considers the vast majority of the offerings to be securities, which must be registered the regulator to be lawful. Earlier this month, the SEC imposed its first fines against companies for failing to register coin offerings.
To contact the reporter on this story: Ben Bain in Washington at [email protected] To contact the editors responsible for this story: Jesse Westbrook at [email protected] Gregory Mott