Both men concealed the fact that they had received money for promoting cryptocurrencies through their social media accounts.
Music producer DJ Khaled and boxer Floyd Mayweather Jr have settled charges in the US after they secretly received payments for promoting cryptocurrencies.
According to the US Securities and Exchange Commission (SEC), the pair have been fined without admitting or denying the accusations.
Mayweather failed to disclose that he had received promotional payments from three companies which had made Initial Coin Offerings (ICOs) – a controversial method of raising capital by creating coins or tokens using the blockchain technology which underpins Bitcoin.
ICOs reference the initial public offering (IPO) of companies which list on publicly traded stock markets, but see companies issue digital coins tied to their own value instead of shares.
Both men had taken part in the ICO by a company called Centra Tech, which is currently under criminal and civil investigation on fraud charges.
They had promoted the cryptocurrencies through their social media accounts, with Khaled describing Centra’s ICO as a “game changer”, according to the SEC.
Mayweather’s promotions included a message to his Twitter followers that Centra’s ICO “starts in a few hours. Get yours before they sell out, I got mine…”
The SEC made fraud charges in connection with ICOs for the first time last September, when the agency warned: “Investors should be wary of companies touting ICOs as a way to generate outsized returns.”
On Thursday, the agency said it had found that Mayweather had been paid at least $300,000 for promoting three ICOs, while DJ Khaled had received at least $50,000.
Mayweather was fined more than $600,000 for his part in the ICO promotion, and DJ Khaled agreed to pay more than $150,000 for his promotional activities.
Both men have agreed to a ban preventing them from promoting any securities “digital or otherwise” for at least two years in the case of DJ Khaled, and three for Mayweather.
“These cases highlight the importance of full disclosure to investors,” said Enforcement Division co-director Stephanie Avakian. “With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.”
“Investors should be sceptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements,” said Enforcement Division co-director Steven Peikin.
“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.”
Another prominent Twitter user and cryptocurrency enthusiast, John McAfee – the eccentric founder and namesake of anti-virus company McAfee – has claimed to be on the run from the SEC.
Source: Skynews
