The recent flood of celebrity-endorsed initial coin offerings (ICOs) have drawn a rebuke from the US corporate regulator, which warned that such endorsements may be illegal.
In a statement issued overnight, the US Securities & Exchange Commission (SEC) said people should be wary of investments that sound “too good to be true”.
The regulator then took direct aim at the celebrity endorsement of ICOs, saying that such actions may be in breach of US securities law.
Celebrities including boxer Floyd Mayweather, Paris Hilton, and DJ Khaled have all recently used social media to promote ICOs.
Here’s a recent example by comedian and actor Kevin Hart.
— Kevin Hart (@KevinHart4real) September 16, 2017
The SEC didn’t name anyone in its statement.
The warning follows a recent appraisal of ICOs by the SEC, where it determined they may represent securities, and are therefore subject to stricter regulations..
“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,” the SEC said.
“A failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws.”
So far in 2017, around 270 ICOs have been issued raising more than $US2 billion and as a result, the industry is beginning to come under increasing regulatory oversight.
The SEC statement included a warning to potential investors in the new space.
“Investors should note that celebrity endorsements may appear unbiased, but instead may be part of a paid promotion. Investment decisions should not be based solely on an endorsement by a promoter or other individual,” the SEC said.
“The SEC will continue to focus on these types of promotions to protect investors and to ensure compliance with the securities laws.”