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wilslaw

Social Media Influencers who publicized Crypto ICOs

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The U.S (SEC) Securities and Exchange Commission (SEC) is dealing with crypto ICO projects and a top official said some cases are still yet to be resolved.

 

Another enforcement by the SEC is expected to be on social media influencers who have done well to inform the general public about the existence of ICOs

 

When is ICO promotion illegal?
The SEC could target any individual or organization, if there is enough evidence to show that ICO organizers have compensated an individual or organization in order to publicize a token sale without any disclosure of the amount obtained from ICO project to the target audience.

 

Last year, the SEC said “Any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion.” It made emphasis that failure to disclose compensation is regarded as a fraudulent practice.

 

The commission said "Investors should be skeptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements. Social media influencers are often paid promoters, not investment professionals, and the securities they’re touting, regardless of whether they are issued using traditional certificates or on the blockchain, could be frauds.”

 

If a celebrity is paid to promote ICO to the general public, and SEC considers ICO as a security, such individual has violated the U.S securities regulations.

 

Most ICOs are securities
For the past seven months, US's largest fiat-to-crypto exchange, Coinbase, has been collaborating with regulators to list extra digital assets on its platform.

 

Coinbase announced its interest in listing Zcash (ZEC), Stellar (XLM), Basic Attention Token (BAT), Cardano (ADA) in May. Almost seven months now, only three out of the above mentioned cryptocurrencies have been added.

 

Hacked.com made a report on Tuesday that , the chairman of the SEC, Jay Clayton, said the commission regards majority of ICOs in the global markets as securities. 

 

"We don’t believe Bitcoin is a security. Many of the ICOs that you see and you talk about, they are securities. And if you’re going to offer or sell securities, you have to do so in compliance with our laws. We’ve been clear about that, the recent actions further emphasized that our securities laws to apply to the ICO space, and if people are going to raise money using initial coin offerings they either have to do so in private placement or register with the SEC.”

 

Publicizing an ICO that is considered to be a security without disclosure of compensation to the target audience could attract a penalty that is much greater than  the compensation received, like the case of Floyd Mayweather who received a compensation of $300,000 but paid more than $600,000 as penalty fee.
 

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