ICO promoters and other social media influencers will now be targeted by the US Securities and Exchange Commission (SEC). The SEC is not known to be friendly towards ICOs and has a number of cases against token launches.
The recent settlement with music mogul DJ Khaled and professional boxer Floyd Mayweather are examples of SEC coming down hard on people who promote ICOs without informing the regulator about the compensation received. This had been warned by SEC a year back when it said, “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.”
In November, it again emphasized the role of promoters in ICOs, this time turning towards investors: “Investors should be skeptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements. Social media influencers are often paid promoters, not investment professionals, and the securities they’re touting, regardless of whether they are issued using traditional certificates or on the blockchain, could be frauds.”
The move is definitely going to affect ICO promotions in the United States. With most ICOs declared securities under its regulations, SEC chairman Jay Clayton said, “Many of the ICOs that you see and you talk about, they are securities. And if you’re going to offer or sell securities, you have to do so in compliance with our laws.”
Coinbase, for example, has been working very closely with the US regulators and even with its wish to add five tokens to its listing, has only been able to do only two in the last seven months. Listing of an unauthorized token that is a security can lead to indictment for illegally distributing unregistered securities.
The penalties are heavy, with fines being double to that of money received. Mayweather was fined USD 600,000 for promoting three different ICOs in return for USD 300,000.
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