In a sign that federal authorities are getting serious about cracking down on fraud in the cryptocurrency world, the Securities and Exchange Commission (SEC) recently announced its first case settled over alleged fraud in touting initial coin offerings (ICOs). The case is significant in that it targeted some of the biggest names in sports and entertainment, boxer Floyd Mayweather and rapper DJ Khaled. Both Mayweather and Khaled agreed to settle the charges without admitting wrongdoing.
This particular case related to endorsements from Centra Tech Inc., which was launching an ICO. The company paid Mayweather $100,000 to endorse the ICO and paid Khaled $50,000 for his endorsement. The Centra ICO was shut down by the SEC earlier this year as a fraudulent scheme to part investors from their money. The duo behind the scheme managed to raise more than $32 million from investors who poured their money into the ICO, but had no plans to actually make good on any of their promises.
That doesn’t look good for Khaled and Mayweather, particularly since Mayweather was also paid hundreds of thousands of dollars to promote two other ICOs. In total, Mayweather and Khaled will pay a combined $750,000 in penalties and disgorgement.
This should serve as a reminder to investors to really do their due diligence when investing in cryptocurrencies. There have been numerous fly-by-night operators popping up to take advantage of people lured in by the appeal of quick, easy money in the burgeoning world of cryptocurrencies.
That’s why investing in proven cryptocurrencies such as Bitcoin, Litecoin, and Ethereum, investing in proven investment vehicles such as Bitcoin IRAs, and working with providers and custodians with a track record of helping investors is so important. Not doing your due diligence before investing in cryptocurrencies is a recipe for getting yourself into a heap of trouble and potentially losing a whole lot of money.