The crypto market has evolved and has become mainstream. And for altcoins, it is also becoming competitive. In reality, there are over thousands of cryptocurrencies. In fact, as of writing this article, there are 1562 cryptocurrencies around. And in order to stand out, many of its founders need to get some help from familiar faces. One of the best ways to cater cryptocurrencies to your target market is by using celebrities.
However, there is a chance that celebrity endorsers of cryptocurrencies are at risk of legal action both from investors and from regulators according to a legal expert. This is following a US case wherein a famous promoter of a so-called initial coin offering collapsed.
The Securities and Exchange Commission last week charged the two men who were allegedly involved in taking $32 million from thousands of investors via an ICO. The co-founders were able to raise funds via a fraudulent startup called Centra Tech.
Endorsed by Money Mayweather
Centra Tech was endorsed by Floyd Mayweather. They were slapped with criminal charges after raising more than $25 million without registering the offering with the regulator.
Floyd Mayweather is considered by many as the number one pound for pound boxer today. He is known for his undefeated record. He already beat the likes of Manny Pacquiao, Oscar Dela Hoya, Shane Mosley, and Diego Corrales to name a few. Mayweather tweeted that “Centra’s ICO would start soon and urged users to buy the coin before it is sold out”.
Both Sohrab Sharma and Robert Farkas were both included in the criminal complaint that was filed in Manhattan Federal Court. They were both accused of conspiracy to commit securities fraud and wire fraud. One of the allegations that presented before them was that both persuaded investors to invest by saying that they already have a partnership with both Visa and Mastercard.
According to Steve Pekin who is the co-director of the SEC’s Division of Enforcement, “The defendants have marketed their plans by relying heavily on celebrities and social media”. He added that “Cetra has sold investors by promising new digital technologies and using a sophisticated marketing campaign to lie about their supposed partnership with legitimate businesses. As the complaint follows, these and other claims were simply false”.
Warning VS. Tokens
This doesn’t look good considering the scrutiny that the crypto market is getting from the SEC and other regulators all over the world. The Security and Exchange Commission already warned investors regarding buying tokens. They have already given various points which users should take note of before buying.
According to Jay Claton who works as the Chairman of the SEC, “I think if we don’t stop the fraudsters, there is a serious risk of a regulatory pendulum – the regulatory actions will be so severe that they will restrict the capacity of this new security”.
Could Celebrities Be Sued?
If you will ask Nick Morgan who worked as a former SEC attorney and a partner at US law firm Paul Hastings, he mentioned that SEC had “left the door open” when it comes to pursuing celebrities or others who may have promoted fraudulent ICOs.