The personal problems of celebrities are often widely publicized. An overlooked beneficiary of such publicity can be the Securities and Exchange Commission (SEC). News of an SEC enforcement action involving a celebrity undoubtedly reaches a larger and more diverse audience than does a typical enforcement action – TMZ does not spotlight the latest public company recordkeeping violation. The enhanced publicity garnered from celebrity involvement in an SEC action can help the agency more broadly warn would-be bad actors of the consequences of securities violations and alert investors to fraud schemes. This scenario puts celebrities at heightened risk when involved with companies that come under SEC scrutiny, as the agency might be motivated to charge the celebrity (or announce their involvement with a punished company) to more widely publicize the action.

The benefits to the SEC of pursuing actions involving celebrities is well-illustrated by recent enforcement actions against two high-profile celebrities. On November 29, 2018, the SEC announced charges against Floyd Mayweather Jr. and Khaled Khaled (aka DJ Khaled). Mayweather is one of the most successful and celebrated boxers in American history and Khaled is a music industry mogul and world-renowned music producer. Given the immense popularity of Mayweather and Khaled across many segments of society, these enforcement actions generated a level of publicity for an ongoing SEC initiative to warn the public of the perils of Initial Coin Offerings (ICOs) that the SEC could not otherwise have replicated through its traditional public announcements and investor education initiatives.1

Mayweather and Khaled were charged with improperly promoting investments in ICOs.2 Cracking down on illegal ICOs and protecting investors from fraudulent ICO schemes is a chief priority for the SEC as ICOs are a hot vehicle for raising capital. In 2018, over 1,200 ICOs raised an aggregate of $7.5 billion.3 The proliferation of ICOs prompted the SEC in July 2017 to warn the public that virtual tokens or coins sold in ICOs may constitute securities and that persons involved in the offer and sale of such a security must comply with the federal securities laws.4 The SEC’s concern escalated when ICO issuers began utilizing celebrity endorsements to generate public interest in their ICOs. In response, the SEC warned in November 2017 that celebrities can run afoul of the law for failing to disclose compensation received in exchange for promoting an ICO.5 By suing Mayweather and Khaled, the SEC demonstrated its intent to punish celebrities who fail to heed this warning.

The SEC charged Mayweather and Khaled with violating the “anti-touting provision” of Section 17(b) of the Securities Act of 1933, which prohibits persons from receiving undisclosed compensation in exchange for publicizing securities on behalf of a company. The SEC alleged that Mayweather and Khaled touted investments in certain virtual coin or token ICOs on their Instagram, Twitter and YouTube accounts without disclosing payments they received for their promotional efforts. For example, Mayweather’s Twitter account posted a picture of Mayweather holding his boxing title belts with the caption:  “Centra’s (CTR) ICO starts in a few hours. Get yours before they sell out, I got mine . . . .”  Similarly, Khaled touted Centra’s ICO and debit card product on his Instagram and Twitter accounts and included the statement: “This is a Game changer here. Get your CTR tokens now!” The SEC required Mayweather and Khaled to disgorge (forfeit) all the compensation they received for promoting the ICOs and to pay additional penalties and prejudgment interest (totaling over $600,000 for Mayweather and over $150,000 for Khaled). In addition, the SEC prohibited Mayweather and Khaled from promoting any securities for three years and two years, respectively.

A celebrity understandably might not focus on the possibility that an endorsement could be illegal, due to the prevalence of celebrity endorsements. However, the SEC’s actions against Mayweather and Khaled serve as an important reminder that celebrity endorsements can bring scrutiny from multiple government regulators (not just the SEC).6 As for the SEC,  celebrities should be careful when endorsing any type of investment in a company because the SEC has broad jurisdiction over investments and securities. And celebrity endorsements of ICOS (and cryptocurrencies generally) should be approached with extreme caution as the SEC is closely monitoring and scrutinizing this area. In light of the SEC’s ICO pronouncements discussed above and the heightened publicity surrounding the Mayweather/Khaled enforcement actions, the SEC clearly expects celebrities to be on notice that ICO endorsements must comply with the federal securities laws. As such, the SEC likely will pursue and impose harsh punishments on future celebrity violators in the ICO space.

Mayweather once said, “Boxing is real easy. Life is much harder.” Without a doubt, SEC scrutiny will make anyone’s life more difficult. To avoid the hassle of a regulatory inquiry (which can be costly and time consuming) and to protect themselves from potential liability, celebrities should consult counsel when considering an endorsement involving any type of investment in a company. Counsel can provide legal advice on potential risks associated with endorsing an investment and how to mitigate those risks.

1 The Mayweather and Khaled settlements were reported on websites that target many different segments of society, including websites that focus on entertainment news, online news media, music and sports.  See, e.g., TMZ, “Floyd Mayweather Pays $600,000 to Settle SEC Charges in Cryptocurrency Case” (Nov. 29, 2018), available at; Motherboard Vice, “The Feds Charged the Masterminds Behind a DJ Khaled-Endorsed ICO With Fraud” (Apr. 3, 2018), available at; Billboard, “DJ Khaled & Floyd Mayweather Settle Charges From SEC After Failing to Disclose ICO Payments” (Nov. 29, 2018), available at; The Shade Room, “SEC Fines DJ Khaled And Floyd Mayweather For Illegally Promoting a Fraudulent Cryptocurrency” (Nov. 30, 2018), available at; ESPN, “Floyd Mayweather Settles With SEC Over Digital Coin Promotions” (Nov. 29, 2018), available at; BuzzFeed News, “DJ Khaled And Floyd Mayweather Are Paying Hefty Fines to Settle a Cryptocurrency Case With Federal Regulators” (Nov. 29, 2018), available at;  Vulture, “DJ Khaled, Floyd Mayweather Jr. Have to Pay the SEC a Lot of Money for Alleged Cryptocurrency Scam” (Nov. 29, 2018), available at; and Rolling Stone, “DJ Khaled Settles With SEC on Cryptocurrency Dispute” (Nov. 29, 2018), available at

2 Virtual coins or tokens are digital assets created and disseminated using distributed ledger or blockchain technology.  Companies and promoters have been selling virtual coins or tokens through ICOs. See SEC Investor Bulletin: Initial Coin Offerings (July 25, 2017), available at

3 See cumulative ICO funding in 2018 to date, available at

4 SEC Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934, The DAO (July 25, 2017), available at

5 SEC Public Statement, Statement on Potentially Unlawful Promotion of Initial Coin Offerings and Other Investments by Celebrities and Others (Nov. 1, 2017), available at

6 See e.g., Warning Letter from Robert Dean, Div. Dir., Office of Prescription Drug Promotion, U.S. Food and Drug Admin. to Eric Gervais, Executive Vice President, Duschesnay, Inc. (Aug. 7, 2015), available at
(FDA Warning Letter Regarding Kim Kardashian Social Media Posts); Federal Trade Commission Press Release, FTC Staff Reminds Influencers and Brands to Clearly Disclose Relationship (Apr. 19, 2017), available at (FTC sent 90 letters to celebrities and influencers on social media advertising guidelines).  In September 2017, FTC sent letters to 21 celebrities and influencers including rapper Nicki Minaj, talk show host Ellen DeGeneres, supermodel Naomi Campbell, actresses Lindsay Lohan, Vanessa Hudges, Sofia Vergara, and other media personalities regarding their advertisement practices on social media. See Reuters article, “FTC Demands Endorsement Info From Instagram ‘Influencers'” (Sep. 30, 2017), available at