The U.S. SEC (Securities and Exchange Commission) has filed charges against the Centra Tech ICO (Initial Coin Offering), claiming that the legendary boxer, Floyd Mayweather promoted a token sale, which was allegedly a sham security offering.
According to the SEC complaint, the co-founders of Centra ICO are involved in the ICO fraud and made material misstatements as well as omissions that were intended to trick the investors whereas, the Centra ICO was also an “unregistered securities offering.”
SEC Ceases ICO
According to the Securities and Exchange Commission, Centra only pretended to have relationships with major financial institutions and lied about it. The major financial institutions which sent Centra several cease-and-desist letters are:
In addition to that, some of the executives showed in Centra’s advertising materials were also fake. The co-director of SEC’s Division of Enforcement, Stephanie Avakian stated:
“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.”
Furthermore, he added:
“As the complaint alleges, these and other claims were simply false.”
The Securities and Exchange Commission originally subpoenaed Centra in the month of February as part of its wide-investigation into ICOs.
Centra ICO Dependence
The Centra ICO is quite well-known because of its use of celebrity endorsements to advertise its product. Floyd Mayweather, who is known as a legendary boxing champion and has made paid-endorsements for numerous ICOs, had worked a lot on the promotion of the token sale on various social media platforms and got more than 5,600 like and 1,500 retweets. DJ Khaled was also hired by Centra for the promotion of the ICOs; however, no celebrity was named in the summons.
Steve Peikin also stated:
“As we allege, the defendants relied heavily on celebrity endorsements and social media to market their scheme…. Endorsements and glossy marketing materials are no substitute for the SEC’s registration and disclosure requirements as well as diligence by investors.”
The SEC has also cautioned that some of these ICO endorsements by celebrities might be illegitimate especially if the parties don’t make any obligatory public disclosures. On the other hand, Mayweather’s tweet promoting the token sale, such as, doesn’t specify that it is a paid advertisement.