The SEC issued a press-release
warning against the celebrities advertising of the ICOs because more and more celebrities are starting to endorse companies performing ICOs and promoting their tokens on social media.
It is not a secret that many celebrities, actors, athletes and other socially visible people make money by advertising different products. And although some tokens could be considered digital products, some are securities, which are sold without proper registration required by the securities laws of the U.S. and other countries.
The endorsement of securities also require a person to disclose the nature, source, and amount of any compensation paid, directly or indirectly, in connection with such endorsement. A failure to disclose this information is a violation of the anti-fraud provisions of the U.S. securities law, which carry penalties. Celebrities also may be found personally liable as promoters for knowingly making any false representations.
However, it appears that the celebrity promoters may lack an understanding of the tokens’ nature, legality of the offerings, legal requirements, their personal responsibilities and potential liability. Nor do the celebrities have sufficient expertise to recommend a particular investment or purchase. Use of celebrities in the ICO advertising does not guaranty its legitimacy and reliability of the offered tokens.
The SEC warns token buyers to be aware of these facts and to do an extensive research prior to buying any tokens, even if such tokens are endorsed by celebrities.
Written by Katrina Arden
Attorney and founder of Blockchain Law Group