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What appeared to be an unbiased social media initial coin offering (ICO) promotion goes south as the United States SEC disclosed that it was, in fact, a paid promotion. This discovery has left two infamous celebrities – renowned music producer, DJ Khaled and boxing pro, Floyd Mayweather – paying thousands of dollars as penalties.
Both celebrities took to their social media pages to tout Centra Tech, a fraudulent ICO firm, and its ICO. Floyd Mayweather went as far as changing his name to Floyd Crypto Mayweather. An act which came across as an unbiased stand to the public was later uncovered to be a bait to garner investors for the ICO firm, Centra Tech.
The SEC press release stated that DJ Khaled and Floyd Mayweather received a promotional fee of $50,000 and $100,000 respectively. They are being charged for failing to disclose that they were paid for the promotion, thus, misleading unsuspecting crypto investors. According to the SEC, Floyd Mayweather also received an additional $200,000 to promote two other ICOs.
Following the SEC discovery, both celebrities have to return the promotional fee they got alongside some other penalties worth tons of dollars. Although none of the celebrities admitted nor denied the findings, they both agreed to refund the promotional fee as payment in disgorgement and other penalties attached to the charge.
DJ Khaled, who was accused of receiving a $50,000 promotional fee, agreed to pay $50,000 in disgorgement, $2,725 in prejudgment interest, and a $100,000 penalty and promised not to engage in any promotion or campaign for securities, digital or otherwise for two years. Floyd Mayweather, in the same vein, agreed to pay $300,000 in disgorgement, $14,775 in prejudgment, and a $300,000 penalty. He also agreed to steer clear of any promotion whether securities, digital or otherwise for three years.
Commenting on the turn of event, the SEC Enforcement Division Co-Director Steven Peikin advised crypto investors and the general public to be mindful of social media campaigns. Most of these social media influencers are not investment professionals; instead, they are paid to promote the brand.
Furthermore, he urged investors – crypto and non- crypto investors alike – to be skeptical of investment advice posted on social media platforms. And that they shouldn’t make any investment decision based on celebrities endorsement as they are usually paid and the securities they are touting may be frauds.