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SEC Charges Celebrities $3.8M for Illegal Crypto Promotions

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Which Celebrities Have Been Charged by SEC for Promoting Crypto?

The US Securities and Exchange Commission (SEC) has charged 12 American celebrities so far, for failing to disclose that they were paid to promote crypto assets on their social media accounts. 10 of the celebrities have settled charges with the SEC without admitting wrongdoing, by paying a total of $3.8 million in penalties, disgorgement and prejudgment interest.

On one level, the SEC is warning influencers that they need to disclose sponsored posts and reminding investors to be wary of celebrity endorsements of crypto. At the same time, these charges against celebrities serve as a high profile opportunity for the SEC to strengthen their claim that cryptocurrencies are financial securities, and to ramp up regulation of the digital assets.

The SEC charged these celebrities as part of its crackdown on cryptocurrency, in relation to three separate cases: Justin Sun in 2023, EthereumMax (EMAX) in 2022, and Initial Coin Offerings (ICOs) in 2018.

Ex-NBA star Paul Pierce and socialite Kim Kardashian have been charged the most by far, paying the SEC $1.40 million and $1.26 million respectively. Both were charged under the EMAX case and agreed not to promote any securities for three years, according to SEC announcements last year.

Ex-professional boxer Floyd Mayweather Jr. was charged the third highest amount of $0.61 million. He was charged in the SEC’s first cases against illegal promotions of ICOs, alongside music producer DJ Khaled who was charged $0.15 million. The 2018 charges also concluded with Floyd Mayweather and DJ Khaled banned from promoting any securities, for three years and two years respectively.

Most recently in the Justin Sun case, 6 celebrities were charged by the SEC for a total of $406,729. Music artist Akon paid the most at $170,814, followed by boxer Jake Paul’s $101,887. Actress Lindsay Lohan and two other music artists, Ne-Yo and Lil Yachty, were charged around $40,000 each, while pornstar Kendra Lust was charged the least at $3,884.

Soulja Boy and Austin Mahone, who were also charged under the Justin Sun case, have yet to settle with the SEC.

Altogether, the SEC’s crackdown on celebrities for undisclosed crypto endorsements has resulted in settled charges against 4 musicians, 3 athletes, 2 actresses and 1 socialite.

Celebrities’ SEC Charges vs How Much They Were Paid

One of the factors that determined how much the SEC charged celebrities was the estimated amount that each celebrity received, in exchange for promoting the cryptocurrencies on their social media. The multiplier used to decide the settlement charges varied, depending on each case.

In the Justin Sun case, all 6 celebrities were charged at around 4.07 times of what they were paid for posting one tweet each. For example, Lindsay Lohan was found to have received $10,000 for tweeting about JUST (JST), Sun Token (SUN) and TRON (TRX). As a result, Lindsay Lohan’s settlement charges to the SEC amount to $40,670.

In the EMAX case, Paul Pierce posted multiple tweets and was charged at 5.77 times of the amount he was paid for the crypto promotions. Kim Kardashian was charged 5.04 times the amount she was paid for one post, likely due to her significantly larger social media reach with around 225 million Instagram followers. In comparison, the other celebrities’ Twitter following were only in the millions range.

In the 2018 ICOs case, Floyd Mayweather was charged 2.05 times the amount he received for the endorsements, while DJ Khaled was charged 3.05 times of how much he was paid.

Celebrities’ SEC Charges vs Their Net Worth

While the $3.8 million charges might sound like a large sum of money, it is only 0.18% of the ten celebrities’ combined net worth.

The settlement charges had the smallest impact on Kim Kardashian, making up just 0.09% of her $1.4 billion net worth. On the other hand, Lindsay Lohan was dealt the biggest blow, with her settlement charges amounting to 2.03% of her $2 million net worth.

Methodology

The study examined the US SEC’s charges against celebrities for crypto-related promotions, as of March 27, 2023. Data for the net worth of celebrities was based on Celebrity Net Worth.

(By Lim Yu Qian)

Read more: https://www.coingecko.com/research/publications/sec-charges-celebrities-crypto-promotions

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