SEC HITS FLOYD MAYWEATHER AND DJ KHALED WITH OVER $750,000 IN PENALTIES
Steven T. Lowe
On November 29, 2018, the U.S. Securities and Exchange Commission (better known as the “SEC”) hit boxing champ Floyd Mayweather (“Mayweather”) and musician/media mogul DJ Khaled (“Khaled”) with over $750,000 in penalties for endorsing initial coin offerings (“ICO”)- which are essentially “fundraisers” for new cyptocurrency businesses- to their fans via social media without disclosing they were getting paid for the ads. Mayweather and Khaled are the first ever to be penalized for advertising an ICO.
According to the SEC, Mayweather was paid $100,000, and Khaled $50,000, to urge their millions of social media followers to buy “Centra tokens” (tokens used for a payment platform consisting of a mobile wallet and an international debit card) in September of 2017.
The SEC determined that Mayweather will be required to pay $300,000 in disgorgement to investors, in addition to $300,000 in penalties, plus about $14,700 in interest. Khaled will disgorge $50,000 to investors, and pay a $100,000 penalty, along with some $2,700 in interest.
Mayweather has also agreed to a three-year ban from paid plugs (i.e., advertising) for securities after he was also written up for advertising for Stox.com and Hubii.network, both for $100,000 each.
Khaled agreed to a two-year securities advertising ban. No other ICOs were mentioned in his settlement order, nor was there any mention of future cooperation.
The SEC is represented by Alison R. Levine of its New York Regional Office and Jon A. Daniels, Luke M. Fitzgerald, John O. Enright and Robert A. Cohen of its Enforcement Division’s Cyber Unit.
Khaled is represented by Charles Spada and Jeannie Rose Rubin of Lankler Siffert Wohl LLP. Mayweather is represented by James Sanders of Reed Smith LLP and Richard Wright of Wright Marsh & Levy, according to the SEC.
The cases are In the Matter of Floyd Mayweather Jr., file number 3-18906, and In the Matter of Khaled Khaled, file number 3-18907, before the U.S. Securities and Exchange Commission.
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