ICO organizers are upgrading their marketing strategy and are turning to celebrities to call onto their fans to invest in their ICOs. For Centra Tech they paid boxing champ Floyd Mayweather Jr and music producer DJ Khaled to promoter their ICO to their fans, but the ICO ended up to be a sham.
With the two celebrities at the forefront of promoting Centra Tech ICO to their fans, the firm was able to raise more than $32 million from the ICO. Centra Tech was founded by Robert Farkas and Sohrab “Sam” Sharma. With the cash at hand the founders cleared out their accounts and were about to disappear but were not so lucky. They were both arrested on April 1 with the former arrested when he was about to board a flight. According to SEC Centra Tech was an unregistered entity that was up and running. Furthermore, the founders were engaging in fraudulent activities by knowingly making omissions and misstatements in their materials to dupe investors.
To promote its ICO Miami based firm used social media platforms together with celebrity endorsement by Floyd Mayweather and DJ Khaled. Although the two were not included as accomplices in charges against Centra Tech charges were issued to them for not disclosing they were paid for promoting Centra. For the former, he was charged for endorsing three ICOs including Centra Tech and DJ Khaled for was charged for endorsing one ICO. At Centra he was paid a sum of US$100,000 for his services. Besides the $100,000 Mayweather received $200,000 for promoting the other two ICOs. On Khaled’s case, SEC found out he was paid US$50,000 for promoting Centra Tech.
For DJ Khaled he has to pay US$100,000 as penalty for the above activities with an additional of US$50,000 and US$2,725 as disgorgement and prejudgment interest respectively. In addition to the monetary penalties DJ Khaled won’t endorse any securities for the next two years. On the other hand, legendary boxer Mayweather has been slapped with a three-year ban and won’t be available to promote any securities digitally or in any other manner. On monetary penalties, Mayweather has to part with USD300,000 with a further USD300,000 as disgorgement and lastly pre-judgment interest amount standing at USD14, 775.
According to SEC, the two were supposed to disclose they were paid to promote the ICO and not doing so meant their actions to promote the ICO was unbiased.