News > FinTech

SEC Issues Warning About Celebrity Endorsed ICOs

By NexChange
FinTech

The U.S. Securities and Exchange Commission issued a warning on Wednesday about coin offerings that are being promoted by celebrities on social media networks, encouraging “investors to be wary of investment opportunities that sound too good to be true.”

The booming ICO market has attracted several high-profile celebrities, with coin offerings being promoted by the likes of Paris Hilton, Floyd Mayweather and DJ Khaled. However, the SEC’s Enforcement Division and Office of Compliance Inspections and Examinations notes that it “may be unlawful if they do not disclose the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement.”

In its investor alert, the SEC recommends investors take these steps to protect themselves from potential fraud:

  • Check out the background, including registration or license status, of anyone recommending or selling an investment, using the search tool on Investor.gov;
  • Learn about the company’s finances, organization, and business prospects by carefully reading any prospectus and the company’s latest financial reports, which may be available through the SEC’s EDGAR database; and
  • Consider the investment’s potential costs and fees, risks, and benefits in light of your own investment goals, risk tolerance, investment horizon, net worth, existing investments and assets, debt, and tax considerations.

“Celebrities, like anyone else, can be lured into participating (even unknowingly) in a fraudulent scheme,” the SEC writes in its alert. “Also, celebrities are sometimes linked to products or services without their consent so the celebrity may not even have endorsed the investment.”

Photo: @ParisHilton

Subscribe to our Newsletter

Be one of the first to experience the future of financial services