Famed boxer and promoter Floyd Mayweather Jr. and producer DJ Khaled have both been charged by the Securities and Exchange Commission (SEC) for fraud after they were found to have been promoting investment in cryptocurrencies that they were paid to promote. The men will have to pay back around $500,000 in earnings to the SEC, as well as pay penalties with interest on each charge.
All cryptocurrencies are risky investments. As we have seen repeatedly over the past year, Bitcoin and its altcoins have risen and fallen multiple times and are currently at their lowest value in more than a year. Of those risky investments, though, the riskiest of all are initial coin offerings, or ICOs. These are cryptocurrencies which haven’t launched yet and in some cases, do not even have a viable product behind them. They can be as simple as a white paper describing their potential use and despite the lack of a real token or use case for it, many people jump on board early hoping to make a huge return on investment.
It’s ICOs that both Khaled and Mayweather have been charged with fraudulently promoting, specifically Centra, which the SEC has charged separately, claiming that its entire ICO was fraudulent. In the case of Khaled and Mayweather though, the two men have been charged for promoting the cryptocurrency’s ICO without disclosing that they were paid to do so. As CNN reports, Mayweather was paid $100,000 by Centra Tech, while Khaled was paid $50,000.
Mayweather promoted the cryptocurrency through Twitter, suggesting that his followers should invest in it, claiming he had already done so. He also did the same with two other ICOs without disclosing that they had collectively paid him a further $200,000 to promote them. Khaled provided similar promotional efforts on his social media, calling Centra specifically a “game changer” in the industry.
Both will have to pay back all ICO promotion earnings to the SEC and will be fined and forced to pay interest on those initial payments. Both men have settled the charges and will not contest the SEC’s ruling.