DJ Khaled, Floyd Mayweather settle over cryptocurrency promotions

Federal regulators said Thursday that boxing legend Floyd
Mayweather and music producer DJ Khaled are paying a total $750,000
to settle charges they failed to disclose payments they received
for promoting investments in digital-currency securities.

The Securities and Exchange Commission said the cases are its
first involving charges for violating rules on touting investments
in so-called initial coin offerings, or ICOs. An ICO allows a
startup to use the technology behind bitcoin, known as blockchain,
to fund projects.

The SEC said Mayweather failed to disclose promotional payments
from three issuers of ICOs, including $100,000 from Centra Tech
Inc. Khaled allegedly didn’t disclose a $50,000 payment from
Centra, which he touted on his social media accounts as a “game
changer.”

Mayweather and Khaled neither admitted nor denied the
allegations in agreeing to the settlements.

Mayweather’s promotions were said to include a message to his
Twitter followers alerting them that Centra’s ICO “starts in a few
hours. Get yours before they sell out, I got mine.” The boxer has
almost 8 million followers on Twitter.

“You can call me Floyd Crypto Mayweather from now on,” he said
in another tweet, according to the SEC. The regulators allege that
Mayweather neglected to disclose that he was paid $200,000 to
promote the other two ICOs, in addition to Centra’s.

With no disclosure of the payments, “Mayweather and Khaled’s ICO
promotions may have appeared to be unbiased, rather than paid
endorsements,” Stephanie Avakian, co-director of the SEC’s
enforcement division, said in a statement.

Under the settlements, Mayweather agreed to pay a $300,000
penalty, give up another $300,000 and pay $14,775 in interest.
Khaled is paying a $100,000 penalty, giving up $50,000 and paying
$2,725 in interest.

They also agreed not to promote any securities, digital or
otherwise, for three years in Mayweather’s case and two years for
Khaled.

Mayweather and Khaled were among a number of celebrities paid by
ICOs to endorse them. ICOs have soared in popularity in recent
years, raising billions for startups. With an ICO, a startup will
issue currency, sometimes called a token, which can be used to buy
services from the company. For example, a startup offering online
storage could issue tokens that can be used to buy storage.

The SEC urges investors to be skeptical of investment advice on
social media platforms and to not make decisions based on celebrity
endorsements.

How the tokens are marketed is a central question for the SEC.
When a company’s marketing implies that the tokens can appreciate
in value, that can raise a red flag.

Kelly Swanson, a publicist for Mayweather, said he likely
wouldn’t comment on the settlement. Representatives for Khaled
didn’t immediately respond to messages seeking comment.

abc7chicago.com

Related