In August 2017, boxer and wealth enthusiast Floyd Mayweather took to Twitter to promote an Initial Coin Offering from a cryptocurrency company called the Hubii Network. “You can call me Floyd Crypto Mayweather from now on,” he wrote.
Less than a month later, Mayweather used his Twitter feed to promote another ICO, this one from Centra Tech. “Get yours before they sell out, I got mine,” he wrote.
But according to the Securities and Exchange Commission, Mayweather wasn’t letting people in on his crypto insights out of the goodness of his heart. On Thursday, the SEC announced that Mayweather had paid a fine of more than $600,000 for failing to disclose that he had been paid by three cryptocurrency companies to promote their ICOs.
In a news release, the SEC said Mayweather received $100,000 from Centra Tech and $200,000 from two other companies to promote their ICOs. By keeping these payments secret, Mayweather violated federal securities laws that mandate disclosure in such instances.
The SEC also fined music producer DJ Khaled more than $150,000 for similar violations.
“These cases highlight the importance of full disclosure to investors,” Stephanie Avakian, co-director of the SEC’s enforcement division, said in the news release. “With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.”
Said Steven Peikin, the enforcement division’s other co-director: “Investors should be skeptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements. 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.”
In fact, the SEC alleges that one of the companies that paid Mayweather was, indeed, a fraud. In April, Centra co-founders Sam Sharma and Robert Farkas were arrested on charges that they misled investors about their ICO, which raised more than $32 million from investors. The day after their arrests, the SEC filed a lawsuit against them, alleging numerous instances of fraud.