Last year when virtual currency markets were a hot trend, boxer Floyd Mayweather Jr. and music producer and rapper Khaled Khaled, known as DJ Khaled, were getting paid to promote new digital tokens for a cryptocurrency platform called Centra. However, regulators announced on Thursday that the two celebrities will have to give back all the money they received for those promotions and pay additional fines as part of a crackdown on the virtual currency markets.
The SEC has fined Mr. Mayweather and Mr. Khaled for failing to disclose payments they received for promoting initial coin offerings. Mayweather paid a total of $614,775 in fines, disgorgement and pre-judgement interest, while DJ Khaled paid $152,745. Both men settled out of court.
The founders of Centra were arrested and charged with defrauding investors. The men, three friends from South Florida, managed to raise around $30 million through their coin offering, in part with the help of the celebrity promotions. In return, Centra promised its investors that the funds raised in the ICO would be used to build a suite of financial products, including a debit card backed by Visa and Mastercard that would enable users to convert cryptocurrencies into U.S. dollars.
But the problem was that Centra had no relationship with Visa and Mastercard. That means that the card was a sham, and the ICO was a fraud.
On April 2, 2018, the SEC closed Centra down and filed criminal charges for fraud against Sharma and Farkas.
“We allege that Centra sold investors on the promise of new digital technologies by using a sophisticated marketing campaign to spin a web of lies about their supposed partnerships with legitimate businesses,” said Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement, in a press release at the time. “As the complaint alleges, these and other claims were simply false.”
By: Maytinee Kramer
