Champion boxer Floyd Mayweather Jr. and popular music producer DJ Khaled were charged Thursday for failing to disclose lucrative endorsement deals they had to promote cryptocurrencies on social media.
The Securities and Exchange Commission announced the settled charges against the celebrities Thursday, the agency’s first cases regarding violations involving initial coin offerings.
The charges come after Mayweather did not divulge the $300,000 he received in total from three companies offering alternative currencies, including $100,000 from Centra Tech Inc., according to the SEC. Centra Tech, which was offering Centra virtual currency, also paid Khaled, whose real name is Khaled Khaled, $50,000 for publicly supporting its product.
In the problematic posts, Khaled described the embattled financial services start-up as a “game changer,” while Mayweather told his fans to call him “Floyd Crypto Mayweather from now on.”
Without admitting or denying the SEC’s findings, Mayweather agreed to pay $300,000 in disgorgement, a $300,000 penalty, and $14,775 in prejudgment interest, whereas Khaled is liable for $50,000 in disgorgement, a $100,000 penalty, and $2,725 in prejudgment interest. They have additionally been banned from touting securities for three years and two years respectively.
The SEC in 2017 issued a report warning that currencies sold in initial coin offerings may be considered to be securities that are governed by federal securities laws.
Centra Tech’s co-founders, who raised $32 million from thousands of investors last year, have been hit with two legal actions for offering and selling unregistered investments: A civil lawsuit from the SEC in April 2018, and parallel criminal charges from the U.S. Attorney’s Office for the Southern District of New York. The SEC alleges Sohrab “Sam” Sharma and Robert Farkas, the co-founders, orchestrated the initial coin offering on a fraudulent basis.
