American actor and martial artist Steven Seagal recently settled with the U.S. Securities and Exchange Commission (SEC) to pay $314,000 in connection with the initial coin offering (ICO) launched by Bitcoiin2Gen (B2G) back in 2018. According to the SEC, the actor failed to disclose payments received for promoting the token.
There have been cases of crypto trading platforms using celebrities to promote their ICO tokens to drive traffic to their projects.
The endorsement of these celebrities lends some ‘credibility’ to the tokens, thereby attracting investors. However, these popular figures have sometimes promoted fraudulent schemes leading to loss of clients’ funds and subsequently, lawsuits.
Actor Docked $314K for Promoting Bitcoiin2Gen ICO
In a statement published on Thursday, February 27, 2020, the Commission declared that Seagal acted in contravention of the federal securities law regarding anti-touting. According to the law, any individual or celebrity advertising a crypto coin which is categorized as security must reveal how they are being compensated for the endorsement.
Seagal’s unlawful touting happened shortly after the U.S. financial watchdog released the SEC DAO Report in 2017, which warned that ICO tokens could be securities. Speaking on the matter, Kristina Littman, head of the SEC Enforcement Division’s Cyber Unit, said:
“These investors were entitled to know about payments Seagal received or was promised to endorse this investment so they could decide whether he may be biased. Celebrities are not allowed to use their social media influence to tout securities without appropriately disclosing their compensation.”
The virtual currency trading platform, Bitcoiin2Gen, struck a deal with the actor to pay a total of $1 million – $250,000 in cash and $750,000 worth of B2G tokens for endorsements, which Seagal did not disclose. The promotions also included social media posts by Seagal asking his numerous fans not to “miss out” on the ICO, per the SEC’s order.
Also, the actor issued a press release with the title “Zen Master Steven Seagal Has Become the Brand Ambassador of Bitcoiin2Gen.” The crypto trading platform in its press release quoted Seagal saying that he supported the company’s ICO “wholeheartedly.”
Consequently, the SEC fined Seagal a total of $314,000, an amount the actor agreed to pay without denying or admitting any offense. The actor agreed to pay the SEC $157,000 in disgorgement which covers payments for endorsement in addition to prejudgment interest. Seagal is to also pay a penalty fee of $157,000. Apart from the monetary fine, the actor agreed to stay away from endorsing any form of securities for three years.
SEC Going After Celebrity Token Sale Backers
Seagal joins the list of celebrities that have at one time or the other, backed ICO tokens. Back in 2018, former professional boxer, Floyd Mayweather and American DJ and songwriter, DJ Khaled, got into trouble with the SEC after promoting a fraudulent ICO token launched by Centra Tech.
Both celebrities later settled with the commission with Mayweather and DJ Khaled agreeing to pay fines of $614,775 and $152,725 respectively.
Apart from celebrities willingly endorsing crypto tokens, there have also been cases of fraudsters using images and false statements of celebrities.
As previously reported by Blockonomi, Janet Jackson’s ex-husband and Qatari billionaire, Wissam Al Mana, sued Facebook for allowing scammers to use his image to promote their fraudulent scheme on the social medial platform. Also, fraudsters released a false BBC interview with British actress, Kate Winslet, to sell their bogus bitcoin investment scheme to swindle investors.
Some celebrities are, however, launching their own digital currency tokens. Boxing legend, Manny Pacquiao launched the Pac Token, which later announced its initial exchange offering (IEO) listing on the crypto exchange, GCOX.