Celebrity ICO endorsements ‘Potentially Illegal’: SEC

The SEC has issued a public statement that calls celebrity ICO endorsements ‘potentially unlawful’. It has warned that celebrities who inadequately promote security tokens may be responsible for irreverent federal securities laws.

The SEC Office of Compliance Inspections and Examinations and SEC Division of Enforcement states that,

“These endorsements may be unlawful if they do not disclose the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement”.

According to the news, ICOs have appointed an innumerable of celebrities including Floyd Mayweather boxer and Jamie Foxx rapper and Luis Suarez football star. Since they have to endorse their ICOs and promote them on social media.

Also Read: Initial Coin offering fundraising reaches $3billion mark

Meanwhile, SEC has not issued specific guidance on ICOs. Earlier, it stated that this year tokens from the DOA resulted in the creation of Ethereum Classic. However, the securities and other ICO tokens may fall under securities laws, too.

The statement continues:

“Any celebrity or other individuals who promote 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”.

The Coinbase board director and a former federal prosecutor at the Justice Department, Kathryn Haun, tweets that she believes SEC is,

“laying the groundwork to bring charges related to these endorsements. My bet is they’ve already got cases opened and are working on them as we speak”.

Read Next: Including ICO oversight SEC announces making of “Cyber Unit” with broad powers

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Sara K

Sara is steadily working on cryptocurrency evaluations, news, and fluctuations in digital currency prices. She is guest author associated with many cryptocurrencies admin and contributes as an active guide to readers about recent updates on virtual currencies.

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