On November 29, 2018, the Securities and Exchange Commission (SEC) announced that pro boxing superstar Floyd Mayweather, Jr. had agreed to pay a $614,000 fine to settle charges related to social media posts touting cryptocurrency initial coin offerings (ICOs).
Section 17(b) of the United States’ Securities Act of 1933 requires that anyone being paid to tout or endorse a security investment must disclose that fact that the are being compensated to do so. In other words, an endorser may may not deceive the public by hiding the fact that the endorsement was paid for by the promoter of the security. In July 2017, the SEC issued a notice that cryptocurrency investments would be subject to the Securities Act of 1933. Mayweather’s social media endorsements began just two days later, with no evidence that Mayweather was actually aware of the rule.
According to the SEC, Mayweather has more than 7.8 million Twitter followers, 21 million Instagram followers and 13.4 million Facebook followers. Two days after the rule went into effect, Mayweather posted on Instagram, “floydmayweather Champion Predictions: I’m gonna make a $hit t$on of money on August 26th… on the ICO.” There was no hashtag or other indication informing readers that any of the the posts were paid advertisement for the cryptocurrency companies.
Mayweather's Twitter posts included a message that Centra's ICO "starts in a few hours. Get yours before they sell out, I got mine…”. In total, Mayweather was paid $300,000 from three separate ICOs issuers, including $100,000 from Centra Tech Inc.
In April 2018, the United States government filed criminal and civil charges against Centra’s founders, alleging that the ICO was fraudulent.
Mayweather also received $200,000 from two other cryptocurrency companies, tweeting, for example, "You can call me Floyd Crypto Mayweather from now on #HubiiNetwork ICO starts tomorrow!"
Although it did not blame him for Centra Tech's fraud, the SEC charged Mayweather with failing to disclose that he was being paid to promote any of the cryptocurrency investments.
The amount of Mayweather’s payment was a combination of disgorgement, penalties and interest. Without admitting guilt, Mayweather agreed to cough up the $300,000 he received, another $300,000 as a penalty and about $14,775 in interest. Mayweather also agreed he would not promote any securities for the next three years and that he would continue to cooperate with the investigation.
Similarly, rapper DJ Khaled agreed to pay about $152,000 to avoid further proceedings for similar violations.