Top US Entertainer and Sports Star Both Charged with Cryptocurrency Fraud

Nigel Frith
different forms of cryptocurrency

Two high-profile public figures in the US were charged with cryptocurrency fraud on Thursday over their role in the promotion of initial coin offerings (ICOs).

Famous boxer Floyd Mayweather Jr and DJ Khaled, who is a music producer, both posted on social media promoting cryptocurrencies.

Now they have fallen foul of the US Securities and Exchange Commission, or SEC, because they did not declare in the posts that they had been paid to do so. The sums of money involved were large.

Floyd Mayweather is believed to have received $300,000 US dollars from three separate ICO issuers. With $100,000 in particular coming from a firm called Centra Tech.

DJ Khaled, meanwhile, was paid $50,000 from Centra Tech.

Both celebrities have now settled their cases with the SEC. Khaled agreed not to perform any securities promotion for two years, while Mayweather has agreed to not do so for three.

In addition to being charged penalties with a sum of interest on top, they have also both agreed to pay back the SEC the money they received from each promotion.

Mayweather’s penalty amounts to $300,000, plus $14,775 in prejudgment interest. DJ Khaled will need to pay a $100,000 penalty plus $2,725 in prejudgment interest.

According to the SEC, neither celebrity admitted or denied the findings.

The posts made headlines at the time, as they were all particularly promotional and raised obvious questions about legalities.

In one such post, DJ Khaled described the ICO he was promoting as a “game changer”.

Mayweather, meanwhile, encouraged his followers to buy up the tokens as soon as they could. He told his Twitter fans that the ICO “starts in a few hours. Get yours before they sell out, I got mine…”.

In another post, Mayweather alluded to expertise and legitimacy by telling his followers: “You can call me Floyd Crypto Mayweather from now on”.

Separately, Centra Tech has also been charged by the SEC over its ICO.

As well as the significance of the fact that the case covers celebrities, this case is also notable in that it represents the first time the SEC has charged individuals in relation to ICO promotions.

A spokesperson for the SEC said that there had been a risk that the celebrities’ posts could have come across as “unbiased”.

“These cases highlight the importance of full disclosure to investors”, said Stephanie Avakian, who is the Enforcement Division’s Co-Director. “With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.”

The other Enforcement Division Co-Director, Steven Peikin, added that there was always a risk that schemes pushed by social media influencers “could be frauds”.

“Investors should be skeptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements”, he said.

“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.”

Nigel Frith

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