Music producer DJ Khaled and boxer Floyd Mayweather are to pay out many thousands of dollars in settlement of violation of financial laws The Securities Exchange Commission has said.
Although neither has admitted to or refuted the claims, they will pay out a combined settlement in excess of $750,000.
The SEC said that the two had not disclosed receipt of payments to promote certain cryptocurrencies.
These are the first examples of cases brought by the SEC concerning violations of initial coin offerings, known as ICOs, a fairly new vehicle of investment connected with cryptocurrencies, allowing investment in companies by way of purchasing coins or tokens issued by them.
Investors have been warned by the SEC that these offerings are considered to be investments governed by existing securities laws and as such, disclosure for any monies received for promotion must be disclosed.
The SEC revealed that Mayweather received $750,000 to promote three different offerings, including Miami based Centra Tech, who was accused of fraud in April of this year the SEC. The boxer used his Twitter account as one method of endorsement for Centra Tech stating the company’s ICOs “starts in a few hours. Get yours before they sell out, I got mine…”
Khaled received the sum of $50,000 from the same company according to the SEC, which they say he agreed to repay in addition to a $100,000 fine plus interest. Mayweather will repay what he received and a fine of $300,000 plus added interest.
SEC Co-Director Steven Peikin said the cases should be taken as a warning to investors that investment advice posted on social media should be viewed with scepticism and they should avoid making investment decisions based on posts by celebrities on such platforms. He added that social media influencers are often not investment professionals, but often paid promoters and the securities they offer can be fraudulent.