- Telecommunications Giant Vodafone Leaves the Libra Association
- Group of Central Banks Assesses Developing Central Bank Digital Currencies
- South Korea Might Impose 20 Percent Tax on Cryptocurrency Profits
- Report: Terrorists Increasingly Use Crypto to Raise Funds Anonymously
- Canadian Securities Administrators Subject Crypto Exchanges to Securities Laws
The crypto industry keeps delivering bizarre news: According to gossip site TMZ, lawsuits were filed against undefeated lightweight boxing champion Floyd Mayweather and American DJ and record producer DJ Khaled for their alleged role in a cryptocurrency scam that lost its consumers millions of dollars.
The company at the center of the issue is Centra Tech. The company sold $32 million of cryptocurrency in an initial coin offering (ICO) in 2017. The founders of Centra Tech, Robert Farkas and Sam Sharma were arrested in April this year under charges of wire fraud, securities fraud and conspiracy to commit wire fraud and securities fraud. The company even had a fake CEO called “Michael Edwards,” whose profile was propped up with a fake photo found on the internet.
Centra Tech claimed they partnered with Visa and Mastercard to offer a debit card for cryptocurrencies; however, this claim was vehemently denied by Visa. Visa later issued a cease-and-desist order against the company for making references to Visa in its marketing materials.
So Where Do Mayweather and Khaled Come in?
Mayweather and Khaled are being sued because of their role in promoting the company. They both endorsed the company through their social media accounts, encouraging people to invest. Floyd even went as far as saying, “You can call me Floyd ‘Crypto’ Mayweather from now on,” in one of his social media posts about Centra Tech.
While it is not possible to tell the influence these endorsements had, celebrity endorsements are a notoriously effective marketing technique so there is a good case to argue that Mayweather and Khaled did help to raise the profile of CentraTech and encouraged investors to part with their money.
Investors are obviously frustrated and angry at losing so much money to the scam, investors stated that the value of their coin plummeted from $1 per coin in February 2018 to less can $0.02 per coin following the founder’s arrests in April. The victims are going after both the founders and the celebrity endorsers in the lawsuit.
What are the responsibilities of a celebrity endorser?
This lawsuit calls into question the responsibilities of celebrities who endorse products and companies and how much vetting they should do of the companies they endorse. Mayweather and Khaled are yet to comment on the issue, but it’s likely they will deny knowledge of Centra Tech’s shady dealings. This may very well be true since Centra Tech put a lot of effort into creating the public impression that they were a thriving and legitimate company backed up by other huge companies in the financial sector.