Legendary boxer Floyd Mayweather Jr. and music producer Khaled Khaled, known as DJ Khaled, have agreed to pay more than $750,000 in total penalties to settle SEC charges that they promoted cryptocurrency investments without revealing they were being paid.
These are the SEC's first cases charging touting violations involving ICOs.
Khaled and the boxer promoted a number of initial coin offerings (ICOs) to millions of social media followers without disclosing they were paid to promote the securities, according to the SEC.
The SEC said Mayweather failed to disclose promotional payments from three ICO issuers, including $100,000 from Centra Tech Inc., and Mayweather and Khaled failed to disclose a $50,000 payment from Centra Tech, which Khaled touted on his social media accounts as a "game changer."
Mayweather's promotions included a message to his Twitter followers that Centra's ICO "starts in a few hours. Get yours before they sell out, I got mine," the SEC said.
A post on Mayweather's Instagram account predicted he would make a large amount of money on another ICO and a post to Twitter said, "You can call me Floyd Crypto Mayweather from now on," according to the SEC.
The SEC order found that Mayweather failed to disclose that he was paid $200,000 to promote the other two ICOs.
Without admitting or denying the findings, Mayweather and Khaled have agreed to settle the charges and give back the money they were paid to tout the ICOs, including penalties and interest, according to the SEC.
Mayweather agreed to pay $300,000 in disgorgement, a $300,000 penalty with $14,775 in prejudgment interest. Khaled agreed to pay $50,000 in disgorgement, a $100,000 penalty, and $2,725 in prejudgment interest. In addition, Mayweather agreed not to promote any securities, digital or otherwise, for three years, and Khaled agreed to a similar ban for two years. Mayweather also agreed to continue to cooperate with the investigation.
"These cases highlight the importance of full disclosure to investors," said SEC Enforcement Division Co-Director Stephanie Avakian. "With no disclosure about the payments, Mayweather and Khaled's ICO promotions may have appeared to be unbiased, rather than paid endorsements."