SEC Now Target Social Media Influencers Who Promote Cryptocurrency ICOs

United States Securities and Exchange Commission (SEC) has been actively championing for regulation of cryptocurrencies. In a new drive of enforcement, the financial regulator targets social media influencers who promote cryptocurrency ICOs (initial coin offerings).

Social Influencers Targeted by SEC for Promoting ICOs

As noted by CCN,  a top official at the commission has revealed that, a dozen of cases that are related to promotion of fake initial coin offerings are pending. The most recent case involves Floyd Mayweather, a top professional boxer and renowned music producer DJ Khaled. The two have a huge following on virtually all social media platforms.

SEC Now Target Social Media Influencers Who Promote Cryptocurrency ICOs_COINREVOLUTION

Reports indicate that publications, online platforms that review cryptocurrencies, YouTube celebrities, organizations, and individuals involved could be targeted by the financial regulator. However, there has to be sufficient evidence that the social influencer was compensated by the initial coin offering organizers to promote their respective token sale.

While speaking to the press last year, Securities and Exchange Commission official stated that any individual or celerity who promotes a digital coin or token that is categorized as a security is required to disclose the scope, nature, and compensation they receive as payment for the promotion. According to SEC, failure to provide this vital information qualifies the marketing campaign to be categorized as a fraudulent activity.

On November 28th this year, the financial regulator affirmed the earlier statement by warning investors about celebrities promoting digital products on social media platforms. In the statement, the officials categorically stated that investors should not make investment decisions based on celebrity endorsements.

SEC Now Target Social Media Influencers Who Promote Cryptocurrency ICOs

SEC further stated that influencers are paid to promote the products. A majority of them are not qualified to provide investment advice on cryptocurrencies and securities. Note that if a social media influencer markets an initial coin offering after being paid to do so, the ICO is categorized and considered as a security by the Securities and Exchange Commission. As a result of this categorization, the promotion contravenes the stipulated U.S securities regulations created and enforced by SEC.

A Majority of Initial Coin Offerings are Securities

The largest fiat to cryptocurrency exchange here in the United States, Coinbase, has been actively liaising with regulators to provide more digital assets on the platform for trading. Some of the assets that the exchange is interested in include:

  • Zcash (ZEC)
  • Stellar (XLM)
  • Basic Attention Token (BAT)
  • Cardano (ADA)
  • 0x (ZRX)

Seven months since the push to list these digital assets on the platform, only three have been integrated. One of the challenges that Coinbase faces is making sure that a digital asset is not categorized as a security by Securities and Exchange Commission. The exchange could be taken to court for illegally aiding in distribution of securities that are not registered if any of the assets listed  is declared a security by the government.

Last week, the Chairman of SEC was reported by stating that the regulator does not consider Bitcoin as a security, but most of the initial coin offerings are securities. As a result, the companies that organize the ICO are required to comply with the stipulated laws and register with the financial regulator.

Failing to disclose the amount paid to promote the ICO will result in a fine that is double the amount paid. For example, Floyd Mayweather who was paid $300,000 to promote an initial coin offering was fined more than $600,000.