DJ Khaled And Floyd Mayweather Are Paying Hefty Fines To Settle A Cryptocurrency Case With Federal Regulators
The two touted a new cryptocurrency on social media, but failed to disclose that they were being paid for their endorsement, according to the SEC.
DJ Khaled and boxer Floyd Mayweather Jr. have agreed to pay regulators a combined $750,000 after failing to disclose that they were paid to promote investments in cryptocurrency, the Securities and Exchange Commission announced Thursday.
Without admitting guilt, Mayweather agreed to pay $600,000 in fees and penalties, Khaled will pay $150,000, according to the SEC. They also agreed to temporarily stop promoting securities, digital or otherwise.
According to SEC officials, Khaled was paid by Centra Tech Inc. to promote a system that would allow people to convert their hard-to-spend cryptocurrencies to a Visa/Mastercard-backed "Centra card." So to his 12.9 million followers on Instagram and 4.2 million on Twitter, Khaled posted, "I just received my titanium credit card" on Sept. 27, 2017, calling the card a "game changer."
Mayweather, who has 22.3 million Instagram followers and 7.8 million on Twitter, posted messages telling followers telling that Centra's initial coin offering (ICO) "starts in a few hours."
"Get yours before they sell out, I got mine…" he added.
His Instagram account also predicted the world boxing champion would make a large amount of money on another ICO.
"You can call me Floyd Crypto Mayweather from now on," he added on Twitter.
The SEC order found that Mayweather failed to disclose that he was paid $200,000 to promote the ICOs, including $100,000 from Centra Tech Inc. The SEC also determined that Khaled failed to disclose a $50,000 payment from Centra Tech.
Representatives for Khaled and Mayweather did immediately respond to BuzzFeed News' request for comment.
The SEC urged the public in November to be wary of celebrity-backed ICOs. Celebrity endorsements may be unlawful, officials said, if they do not disclose "the nature, scope, and amount of compensation received in exchange for the promotion."
"Investors should be skeptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements," SEC Enforcement Division Co-Director Steven Peikin said in a statement. "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."