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SEC: Celebrity ICO support is "potentially illegal"

Sunday, 12 November 2017

The US Securities and Exchange Commission (SEC) issued a statement that calls public support for various ICO celebrities of all kinds "potentially illegal" and warns that "stars" who thus advertise tokens may be held responsible for violating federal securities laws. In a joint statement issued by the SEC's special unit dealing with violations in the ICO and the SEC Office for Supervision and Verification, it is written that public support for celebrity ICO potentially violates the rules for securities regulation, since they do not properly disclose the source and amount of compensation paid for an advertising campaign.

These advertising companies can be illegal if they do not disclose the nature, source and amount of any compensation paid directly or indirectly by the company in exchange for advertising.

This is important news, because the projects that conduct ICO hired a lot of celebrities to publicly support them and advertise on social networks (although no one officially admitted this fact). ICO was touted by celebrities such as boxing legend Floyd Mayweather, actor and artist Jamie Foxx, one of the members of the hip-hop group Wu-tang Clan and football manager of the English Premier League Harry Redknapp.

Although the SEC did not publish specific guidance on the ICO, earlier this year the commission stated that the DAO tokens are securities.

The statement reads:

"Any celebrity or other person who advertises virtual tokens or coins that are safe should disclose the nature, amount and amount of compensation received in exchange for the campaign. Failure to disclose this information is an anti-advertising violation of the federal securities law. Those who carry out these advertising campaigns may also be held liable for possible violations of the rules of the federal securities law related to fraud in participation in unregistered securities offering and sale, and also that they acted as unregistered brokers."

Kathryn Haun, a former federal attorney for the Ministry of Justice, who now holds a position on the board of directors of Coinbase, said she believes that the SEC is in the process of "laying the foundations" to raise the charges associated with these advertising campaigns. "My bet is that they have already opened business and are working on them, as we say," she said.