Cryptocurrency Scam: DJ Khaled and Floyd Mayweather Sued for Promoting Fraudulent ICO

DJ Khaled and Floyd Mayweather are facing legal troubles from victims of a cryptocurrency scam. The affected investors say the pair contributed to the Centra Tech ICO scam. 


Famous Boxer and Celebrity Music Producer in Hot Soup 

According to TMZ, the two celebrities are being sued for endorsing the Centra Tech cryptocurrency ICO. Back in September 2017, both the boxer and the music producer published tweets endorsing the Centra Tech project. 

DJ Khaled, in particular, called the project “the ultimate winner” and “a game changer.” On the back of these glowing recommendations from personalities as well-known as the pair, the Centra Tech ICO raked in more than $32 million during the crowdsale.

 

The plaintiffs in the class action suit say the endorsements by the two celebrities provided legitimacy for the Centra Tech scam. Inside sources say TMZ obtained court documents showing the pair as co-defendants in the case. 

DJ Khaled

The Centra Tech Cryptocurrency ICO Scam 

Earlier in the year, the United States Securities and Exchange Commission (SEC) charged the Centra Tech founders with wire fraud and securities fraud. According to the indictment, the founders of the project falsely claimed to have partnerships with Visa and MasterCard. 

Based on these fake claims, they sold a debit card that was purportedly capable of allowing users to convert Centra tokens (CTR) in fiat or spend the CTR tokens. According to the SEC, such a partnership did not exist. The three founders – Robert Farkas, Raymond Trapani, and Sohrab Sharma – face up to five years in prison. 

The indictment was a part of a sweeping clampdown against ICO fraud by the Commission beginning in late 2017. At the time, the SEC was worried that unscrupulous elements were using the mania around cryptocurrencies to defraud unsuspecting victims in numerous “pump and dump schemes.” 

ICO scam

Celebrity Endorsement and Fake Cryptocurrency Businesses 

DJ Khaled and Floyd Mayweather aren’t the only celebrities to be caught up in shady cryptocurrency businesses. Others like rapper The Game and Paris Hilton have also touted ICO projects that turned out to be nothing more than a website, and no actual product. 

The SEC issued warnings to celebrities telling them that such endorsements could violate U.S. securities law. According to the Commission, business promotional activities without any an accompanying disclosure of compensation for such endorsements could land celebrities in hot water. There have also been instances when ICOs published fake endorsements luring people to invest in the project.  

Do you think celebrities should stay away from endorsing cryptocurrency businesses? Please share your thoughts with us in the comment section below. 


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SEC Establishes FinHub to Engage Public on Cryptocurrencies

The U.S. Securities and Exchange Commission (SEC) has announced the launch of the Strategic Hub for Innovation and Financial Technology (FinHub) to promote public engagement on fintech-related issues and initiatives, including blockchain technology and cryptocurrencies.SEC Launches FinHub Portal in Connection with the Issuance of Its DAO ReportFinHub, which replaces several internal working groups at the SEC, includes other areas involving the financial markets sector, including automated investment advice, digital marketplace financing, and artificial intelligence and machine learning.Acting as a portal for industry and the public, FinHub will publicize information regarding the agency’s initiatives and create a forum focusing on blockchain and digital assets, according to a press release.To be led by Valerie A. Szczepanik, senior advisor for digital assets and innovation and associate director in the SEC’s division of corporation finance, FinHub will also serve as liaison to other domestic and international regulators regarding cryptocurrencies and other issues, according to the entity chaired by Jay Clayton.“The SEC is committed to working with investors and market participants on new approaches to capital formation, market structure, and financial services, with an eye toward enhancing, and in no way reducing, investor protection,” he added. “The FinHub provides a central point of focus for our efforts to monitor and engage on innovations in the securities markets that hold promise, but which also require a flexible, prompt regulatory response to execute our mission.”The new SEC portal, FinHub, was established in connection with the issuance of DAO Report on July 25, 2017. The document defined ICO tokens as securities, which caused great concern for many players in the crypto space as they prepared to launch their own initial coin offerings. The SEC has also made it clear that the token sales during the ICOs don’t qualify as crowdfunding.“SEC staff across the agency have been engaged for some time in efforts to understand emerging technologies, communicate the agency’s stance on new issues, and facilitate beneficial innovations in the securities industry. By launching FinHub, we hope to provide a clear path for entrepreneurs, developers, and their advisers to engage with SEC staff, seek input, and test ideas”, said Szczepanik.The portal invites public input on matters such as fund innovation and crypto holdings, blockchain applications, and the listing of of VanEck SolidX Bitcoin Trust shares. The financial watchdog has been conservative regarding the entry of Bitcoin ETF applications.By August, the SEC denied nine applications from ProShares, Direxion, and GraniteShares via three recently published documents.Featured image from Shutterstock.

Financial Action Task Force Adopts Changes to Standards Covering Virtual Currencies

The Financial Action Task Force (FATF) has adopted changes to its standards regarding digital currencies and firms involved into cryptocurrency-related activities, according to an announcement published Oct. 19.

Paris-based FATF, also known as Groupe d’action financière (GAFI), is an intergovernmental organization established in 1989 on the initiative of the G7 to set standards and promote effective implementation of legal, regulatory and operational measures to fight money laundering. The FATF has since developed a series of Recommendations recognized as the international standard for combating money laundering (ML) and the financing of illicit activities.

In 2015, the FATF introduced guidance on a risk-based approach to digital currencies, calling all countries to take coordinated action in preventing the use of virtual currencies for crime and terrorism financing (TF).

Now, the organization has determined that the Recommendations require revision as governments and the private sector have sought clarification on exactly which activities the FATF standards apply to.

Per the changes, jurisdictions should ensure that virtual asset service providers — exchanges, wallet providers, and providers of financial services for Initial Coin Offerings (ICOs) — are subject to anti-money laundering (AML) and counter-terrorism financing (CFT) regulations.

According to the FATF, such entities should be registered or licensed and monitored for due diligence compliance, record-keeping, and reporting of suspicious transactions.

The FATF also noted that it will provide clarification in ML and TF risks related to virtual currencies, and at the same time develop a regulatory environment where companies are free to innovate. The statement further reads:

“As part of a staged approach, the FATF will prepare updated guidance on a risk-based approach to regulating virtual asset service providers, including their supervision and monitoring; and guidance for operational and law enforcement authorities on identifying and investigating illicit activity involving virtual assets.”

Last month, the FATF’s president Marshall Billingslea said that current AML standards and regimes for cryptocurrencies are “very much a patchwork quilt or spotty process,” which is “creating significant vulnerabilities for both national and international financial systems”. However, he pointed out that despite the risks related to these assets, digital currency as an asset class present “a great opportunity.”

In June, the FATF announced its efforts to develop binding rules for crypto exchanges, which would also be an upgrade to the non-binding resolutions which were adopted by the FATF in June 2015. Apart from AML measures and reporting suspicious trading operations, the agency will also investigate how to work with countries who have moved to ban cryptocurrencies.