SEC chair Jay Clayton recently said, “every ICO I’ve seen is a security”. If that’s the case, then is every ICO-promoting celebrity an unregistered security promoter?
In the Financial Times today Charles Whitehead, a professor at Cornell Law School, warned all celebrities to be extremely wary of becoming associated with any ICO, no matter how legitimate; assuming that the celebrity was not registered with regulators, they would be acting as an unlicensed promoter of securities.
This is well understood in traditional finance, which is why “at a Goldman Sachs offering, you don’t see Kanye [West].”
SEC Widens its Net
Recently the SEC has started to expand its attention from ICO founders to their celebrity promoters.
Last week it brought criminal charges against the founders of the Centra Tech ICO, alleging that they had spun a “web of lies” about their partnerships and were guilty of “orchestrating a fraudulent initial coin offering.”
Of course, this is hardly the first time that the SEC has brought proceedings against an ICO, but it is the first time it has mentioned celebrity involvement – in this case boxer Floyd Mayweather and music producer DJ Khaled, though they were not named in the release.
For Nick Morgan, currently a partner at the Paul Hastings law firm and previously an attorney for the SEC, they are “clearly sending a signal,” and just because the celebrities were not named, “ … there was nothing in there that I think anyone should take comfort from.”
Not only is the door now open for celebrities to find themselves pursued by the SEC, but it also leaves them vulnerable to lawsuits from disgruntled investors complaining that their token was not all it was promised to be.
So it may be that Messi had better hope that the Sirin Labs’ token pans out, lest he find himself on the hook for the $160 million the company raised at ICO – almost two week’s wages for the world’s leading celebrity product endorser who is also known in some quarters for his footballing skills.