The involvement of two popular entertainers in a months-long ICO fraud case has finally been concluded.
According to a document filed with the United States District Court for the Southern District of Florida, the case against boxing legend Floyd Mayweather Jr. and music producer DJ Khaled for promoting a fraudulent Initial Coin Offering (ICO) has been put to bed.
- 1 Unconvincing proof
- 2 Technicalities force dropped charges
- 3 Not their first Rodeo
- 4 Celebrity power bleeds the ICO market
Both celebrities were charged by investors in the ICO held by Centra Tech, all of who claimed to have been influenced by their posts to make investments in the company.
However, in the new document, Judge Robert Scola maintained that none of the plaintiffs had provided sufficient proof that they followed any of the pair’s social media accounts of had made the investments as a result of their posts.
Mayweather was cited to have promoted the startup’s token sale on his Twitter account, with a post of him holding the company’ debit card and a caption that urged his 7 million followers to get the tokens before they sold out.
However, the judge pointed out that the plaintiffs hadn’t shown enough proof to tie their actions to the post. He also pointed out that two of the plaintiffs were found to have made their purchases before Mayweather made any related post on any of his social media platforms. As for Khaled, his case was also dismissed for basically the same reasons.
Technicalities force dropped charges
The filing also addressed the promoters of the ICO, claiming that the case against them was far more complicated than those against DJ Khaled and Mayweather. Amongst other things, the judge revealed that the promoters created fake people and forged credentials in a bid to give their ICO a legitimate look.
For instance, Centra Tech’s Chief Technical Officer Justin Sykes had two charges against him dropped based on technicalities.
According to the judge, two counts against Sykes was dismissed based on a lack of specific details concerning his involvement with the company and its website. He pointed out that the plaintiff’s complaint didn’t have any detail on the site’s content, its launch date, the alleged wrong statements that were made, and whether the plaintiffs in question even visited the site.
However, while two counts have already been dropped, the document clarified that one crucial count still remains.
Not their first Rodeo
This isn’t the first time that Mayweather and Khaled would be facing legal issues over their involvement with ICOs. A press release published by the United States Securities and Exchange Commission (SEC) on November 29 revealed that the agency had settled charges against both men concerning the promotion of various ICOs without revealing that they were paid for their publicity.
The SEC had previously announced that any coins sold at ICOs should be classified as securities, and as such, anyone promoting them should disclose the relationship that they have with the issuing companies- including the amount paid to them for their promotion services- in compliance with federal security laws.
Both men settled with the SEC and agreed to cease from scurries promotion. They also agreed to remit the fees they received to the agency and make additional payments in penalties.
Under the terms of the agreement, Mayweather- who received $300,000 from three ICO companies, including Centra Tech- paid $624,775 and agreed not to promote any securities for three years.
Khaled was revealed to have gotten $50,000 from Centra Tech, and he agreed to pay a $150,275 fine and desist from securities promotion for two years.
Celebrity power bleeds the ICO market
The SEC’s ban on celebrity ICO promotion seems to also have had a debilitating effect on the global ICO market.
According to a research report published by crypto exchange BitMEX on May 13, the ICO market dropped as much as 97 percent in Q1 2019 alone, pulling just $40 million in investments.
However, while some companies have continued to issue ICOs despite their waning popularity, others have rebranded by switching to conducting Initial Exchange Offering (IEOs). The IEO model was shown to be more successful, with an estimated total market capitalization of $907.7 million.