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Celebrity Endorsers of Initial Offerings and Other Cryptocurrency Products May Soon Face Legal Action while regulators continue to crack down on fraud.
That's what securities lawyers have been warning against the SEC's stock wave against ICOs. "They send a clear signal," former SEC lawyer Nick Morgan told the Financial Times
Morgan, a partner at US law firm Paul Hastings, said that if the SEC had not yet sued celebrities who promote ICOs, the agency "has left the open door "to pursue them in the future.
Last week, the SEC accused the co-founders of the Centra Tech Inc. cryptocurrency start-up of securities fraud. Regulators have accused Sohrab "Sam" Sharma and Robert Farkas of having collected more than $ 32 million through a fake promotion organized by boxing champion Floyd Mayweather and music producer DJ Khaled
While No charges were laid against Mayweather or Khaled, the SEC noted that Centra had used celebrities to promote their symbolic sale.
"The accused relied heavily on celebrity endorsements and social media to market their program," said Steve Peikin, co-director of the SEC's Division of Enforcement.
Lawyer Nick Morgan stated that the fact that Mayweather and Khaled were not named individually in the case against Centra did not mean that they were not concerned. "There was nothing in there that I think someone should draw comfort, just because they were not named individually," Morgan said.
"Know what you endorse"
Beth-ann Roth, a former SEC attorney and partner of Capital Fund Law, agreed. "[The lesson for celebrities is to]" Know what you endorse, "Roth told the FT, saying the promoters could be accused of aiding and abetting the alleged fraud.
The action star Steven Seagal was also recently caught in an ICO debacle. At the end of March 2018, an ICO for a dubious crypto startup called Bitcoiin (also known as Bitcoiin2Gen) abruptly abandoned the project after raising an unknown amount of money.
Their bizarre "exit" occurred three weeks after Bitcoiin received an injunction to stop and abstain, alleging that she was fraudulently selling unregistered securities.
In his order to cease and abstain, the New Jersey Bureau of Securities asked why Seagal was involved, writing: "The Bitcoiin websites do not disclose what expertise, if any, Steven Seagal must ensure that Bitcoiin investments are appropriate and comply with federal and state securities laws. "
ICO celebrities have become fashionable as the budding industry tries to gain ground from investors by relying on celebrity "celebrity power." Actor Jamie Foxx recently tweeted the approval of an ICO on Twitter, just as did Paris Hilton, a mundane.
81% of recent ACIs are scams
While SEC President Jay Clayton recently said that all ICOs are not frauds, studies show that an overwhelming majority are.
According to Satis Group, an ICO consulting company, 81% of ICOs launched since the beginning of 2017 are scams. Given these sobering statistics, lawyers say anyone who promotes an ICO could be held liable for having stripped investors of their money.
"Over the next 90 days, we will see a lot of litigation surrounding the promoters of these OICs," said lawyer David Silver, who oversees a dozen class actions related to cryptocurrency.
Image from Shutterstock to photo
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