DJ Khaled and Floyd Mayweather Fined for Illegally Promoting Scam Cryptocurrency

DJ Khaled and Floyd Mayweather at event
DJ Khaled (second from left) and Floyd Mayweather (second from right) both promoted the Centra Tech ICO.
Kevork Djansezian/Getty Images

The Securities and Exchange Commission announced Thursday that it is fining boxer Floyd Mayweather and music producer Khaled Mohamed Khaled, better known as DJ Khaled, for failing to disclose that they were paid to promote a cryptocurrency.

Both celebrities had been paid to advertise the startup Centra Tech and its initial coin offering, or ICO, a process through which cryptocurrency tokens are distributed to investors. This is the first time that the SEC has charged individuals for improperly touting ICOs.

“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.” ICOs are especially risky investments: The cryptocurrency advisory firm Satis Group estimates that up to 85 percent of ICOs are scams.

Khaled had informed his millions of followers through several social media accounts that Centra Tech’s token would be a “Game changer.” He has agreed to give up the $50,000 he was paid by Centra Tech and also pay a $100,000 penalty and $2,725 in interest. He is further banned from promoting any securities for two years, though he was not forced to admit any wrongdoing.

In September 2017, Mayweather had tweeted to his more than 7 million followers, “Centra’s (CTR) ICO starts in a few hours. Get yours before they sell out, I got mine.” He also promoted two other ICOs on Instagram and Twitter without disclosing that he had been paid to do so. Mayweather is handing over the $300,000 he earned from promoting the offers and paying a $300,000 fine and $14,775 in interest. Mayweather is also banned from advertising any securities for three years but, like Khaled, did not admit to wrongdoing.

The founders of Centra Tech were indicted for securities fraud and wire fraud in May. They had falsely claimed to be partnering with Visa and MasterCard in order to boost their ICO, from which they raised $32 million. The price of Centra Tech’s token subsequently crashed.

Other celebrities such as former boxer Evander Holyfield, soccer player Lionel Messi, and socialite Paris Hilton also promoted ICOs last year when cryptocurrencies were skyrocketing in price. As the New York Times reports, it was not common for celebrities to disclose that they were receiving compensation in exchange for their promotion.

Celebrity cryptocurrency endorsements are less common now than they were in 2017, likely due to slumping prices in the market. For example, the value of bitcoin has dropped 36 percent in November following a year of declines. The cryptocurrency reached its highest-ever value at $19,783.21 last December and is now trading at about $4,000.