Rapper T.I. Charged in Cryptocurrency Scam

By - September 16, 2020
Views: 1

The Securities and Exchange Commission charged rapper T.I. last week with promoting a phony cryptocurrency offering.

The SEC stated in its complaint that the rapper – whose actual name is Clifford Joseph Harris – marketed cryptocurrency tokens on his Twitter account. He also encouraged his Twitter followers to invest in the FLiK initial cryptocurrency offer in 2017. He also allegedly claimed he is a part-owner, which is not true.

The SEC noted that the cryptocurrency offering was a fraud led by film producer Ryan Felton, who had said he would build Netflix on the blockchain but has not delivered. The product still has not been created, and there is no timeline available.

Instead, Felton used money from his investors to increase SPARK’s price, a second token, when he also had control of. Proceeds from the fraud were used to purchase Felton, a Ferrari, a home, various luxury goods, and a home worth $1 million.

SEC Charges That No FLiK Platform Ever Existed

The SEC states that FLiK’s promotional materials promise that FLiK tokens could be redeemed on the FLiK platform for higher amounts in the first year. Each FLiK would be redeemable for $3.99 after the early 90 days, $9.99 after a year, and $14.99 after 15 months. But the SEC noted that no FLiK platform was ever built.

The SEC also states that the initial coin offering for FLiK raised about 539 ether, which was valued at $164,000 in September 2017.

T.I. also asked celebrities to advertise the FLiK ICO on social media channels and offered language for the posts. It referred to the FLiK offering as the rapper’s new venture.

Felton also transferred FLiK tokens in secret to himself and sold them, making him more than $2 million in profits. This was the money he used to buy himself a car, luxury items, and a new home.

The SEC noted that federal securities laws offer the same protections to investors in digital assets than investors in regular securities. The SEC showed in its complaint that Felton victimized investors with misappropriation of funds, material misrepresentations, and manipulative trading.

Without admitting wrongdoing, Harris agreed to pay a settlement of $75,000. The 40-year-old also will not participate in a similar digital asset securities sale for the next 60 months.

In agreeing to pay the fine, Harris is hoping that all of his cryptocurrency problems are over. But he is not the first person in the limelight to make a mistake to get in hot water with the SEC.

Steven Seagal Also Facing Regulatory Action over Cryptocurrency Offering

On Feb. 27, 2020, the SEC announced that it had settled charges against Steven Seagal for not disclosing payments he got for promoting an investment at an initial coin offering that was done by Bitcoiin2Gen (B2G).

The SEC’s order stated that Seagal did not disclose he was promised $250,000 and $750,000 of B2G tokens to promote the cryptocurrency. His promotions included posts on his social media channels that encouraged people not to miss out on B2G’s ICO. He also sent out a press release with the title ‘Zen Master Steven Seagal Is the Brand Ambassador of Bitcoiin2Gen.’

Another press release also had a quote from Seagal that stated he was supporting the ICO wholeheartedly. These promotions were released six months after the SEC noted that coins sold in ICOs might be viewed as securities.

The SEC also advises that any celebrity who promotes a token or coin that is a security must disclose the scope, nature, and amount of compensation they receive for the promotion.

Many celebrities are unaware that new cryptocurrency tokens may be viewed by the SEC as securities. They need to be extremely careful about any marketing they do about these products and disclose their relationship to the work to possible clients as openly as possible.

Investors Should Know About Payments Celebrities Receive

The SEC Enforcement Division Cyber Unit has stated that investors are entitled to know about any compensation Seagal received for endorsing the investment to decide if he is biased.

The order also found that Seagal violated the anti-touting provisions of federal securities laws. Without admitting wrongdoing, Seagal agreed to pay $157,000 in disgorgement, which is what he was paid for the promotions. He also was charged a $157,000 penalty. Seagal has also agreed not to promote any type of security for three years.

References