By Jeff John Roberts
November 1, 2017

The Securities and Exchange Commission shot a thinly-veiled warning on Wednesday at celebrities like Floyd Mayweather and Paris Hilton who have been using their influence to promote so-called “initial coin offerings,” or ICOs.

Such offerings, which involve startups collecting money in exchange for digital tokens, have exploded in popularity in 2017 and seen numerous companies—many of which have little more than a white paper—raise tens or even hundreds of millions of dollars.

The hype around the ICOs has also led companies to seek out celebrity pitchmen like Hilton and media producer DJ Khaled and, especially, Mayweather who has used his social media channels to promote several dubious token sales.

In its warning on Wednesday evening, which came as both a public statement and an “Investor Alert,” the SEC repeated its earlier position that many “tokens” sold in ICOs are in fact securities, and must be treated as such.

The agency also described how celebrities are using social media accounts to promote certain investments, and that such endorsements are unlawful if the celebrity doesn’t disclose they are being paid:

Any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion. A failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws. [emphasis mine]

The SEC announcement is likely to cause concern for Mayweather, who posted the picture below—an apparent endorsement of an ICO—to Instagram this summer

Photo: @floydmayweather—Instagram

Unlike the one above, subsequent posts by Mayweather included text to suggest they were paid endorsements. The disclosures, however, were not especially conspicuous (in some cases amounting to just the hashtag #ad), and it’s unclear if they would be sufficient for the SEC rules.

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As for Paris Hilton, the heiress appeared to promote an ICO called Lydian in early September, writing on Twitter, “Looking forward to participating in the new @LydianCoinLtdToken!” The tweet has since been deleted.

The SEC, which may have issued the bulletins in response to recent celebrity ICO stories in publications like Fortune and the New York Times, did not name any specific celebrities, nor did it announce any enforcement actions—though these may be coming.

“The SEC’s statement should serve as a sober warning to paid celebrity endorsers of ICOs and the ICO sponsors that retain them. The potential liability for violating the anti-touting provisions of federal securities laws can be severe. Given the SEC’s apparent scrutiny of such endorsements, it would not be surprising to see an enforcement action in the near future,” said Robert Crea, a CFA charterholder and an attorney at K&L Gates.

Mr. Mayweather’s promotions company did not immediately respond to a request for comment.

This is part of Fortune’s new initiative, The Ledger, a trusted news source at the intersection of tech and finance. For more on The Ledger, click here.

An earlier version of this story incorrectly described Robert Crea as an accountant.

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