The US Securities and Exchange Commission (SEC) has warned that the initial coin offerings (ICO) that were endorsed by celebrities recently could be illegal.
The commission claimed that the personalities who promote token sales could be violating the "anti-touting" laws if they don’t reveal the compensation (if any) they received from their endorsements.
In a statement that was released by the agency on November 1st, 2017, the SEC warned that celebrities should disclose any compensation they have got for endorsing token sales to avoid violating the anti-touting laws.
"Celebrities and others are using social media networks to encourage the public to purchase stocks and other investments. These endorsements 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."
Several well-known personalities have endorsed some different ICOs in recent months. In September 2017, undefeated boxing champion Floyd Mayweather has promoted the ICO of cryptocurrency credit startup Centra. Actor Jamie Foxx, meanwhile, has endorsed the token sale of Cobinhood, which is advertised as a zero-fee virtual currency exchange. Hotel heiress and reality television (TV) star Paris Hilton has supported the ICO of the venture called Lydian. In 2016, Hilton advertised that she is venturing into the new millennium of technology, community, and social services.
In its warning, the SEC advised that potential investors should not base their decisions mainly on the endorsement of a celebrity. It claimed that the celebrity promotion could be a part of a paid advertisement.
"Investors should note that celebrity endorsements may appear unbiased, but instead may be part of a paid promotion. Investment decisions should not be based solely on an endorsement by a promoter or other individual.”