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SEC warns celebrities over endorsing ICOs without proper disclosure

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‘Wu-Tang is for the children and the children will use the blockchain’

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Celebrities have been known to endorse everything from smartphones to fish fingers, oftentimes without proper disclosure on social media platforms like Instagram. Though the Federal Trade Commission has repeatedly warned influencers, now the US Securities and Exchange Commission is getting involved. It’s adding initial coin offerings (ICOs) to the list of goods stars can’t hawk without disclosing the nature and amount of compensation they’re being paid to advertise them.

The SEC is also warning investors to be wary. “Celebrities who endorse an investment often do not have sufficient expertise to ensure that the investment is appropriate and in compliance with federal securities laws,” it said in a statement. “Investment decisions should not be based solely on an endorsement by a promoter or other individual.”

Hotel heiress Paris Hilton tweeted in support of a cryptocurrency in September (but said it was not sponsored), writing, “Looking forward to participating in the new @LydianCoinLtd Token! #ThisIsNotAnAd.” The tweet has since been deleted. Plenty of others have also tweeted endorsements without clear indication if their posts are ads, including celebrities like professional boxer Floyd Mayweather and actor Jamie Foxx. Ghostface Killah from Wu-Tang Clan also lends his name to Cream Capital, which aims to build the world’s “largest cryptocurrency ATM network.” The company’s FAQ states; “Wu-Tang is for the children and the children will use the blockchain.” DJ Khaled also appears to favor cryptocurrencies.

The SEC warns that failure to properly disclose the paid promotions is a violation of anti-touting and anti-fraud provisions of federal security laws. It also may break laws relating to being unregistered brokers. “We encourage investors to research potential investments rather than rely on paid endorsements from artists, sports figures, or other icons,” the SEC’s statement said.