Paris Hilton, Floyd Mayweather and Jamie Foxx Warned by SEC over ICO Promotion

Celebrities making ICO endorsements may be liable for potential fraud violations of US securities laws.

The US Securities and Exchange Commission (SEC) has finally made a statement about the recent trend of celebrities promoting investments in initial coin offerings (ICOs) to their fans. Notable recent examples of this include socialite Paris Hilton (LydianCoin), Hollywood actor Jamie Foxx (Cobinhood) and boxing champion Floyd Mayweather (Stox).

The regulator explains that after the investigation concerning The DAO, it warned that virtual tokens or coins sold in ICOs may be securities, and those who offer and sell securities in the US must comply with the federal securities laws. Any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion. A failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws. Persons making these endorsements may also be liable for potential violations of the anti-fraud provisions of the federal securities laws, for participating in an unregistered offer and sale of securities, and for acting as unregistered brokers.

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The SEC adds that it will continue to focus on these types of promotions to protect investors and to ensure compliance with the securities laws.

The regulator also warns investors that celebrity endorsements may appear unbiased, but instead may be part of a paid promotion. Celebrities who endorse an investment often do not have sufficient expertise to ensure that the investment is appropriate and in compliance with federal securities laws.

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