On Feb. 17, the U.S. Securities and Exchange Commission (SEC) charged NBA Hall of Famer Paul Pierce with illegally promoting the EMAX token on his social media accounts. EMAX tokens are offered and sold by EthereumMax.
Pierce has agreed to pay a $1,115,000 fine, plus about $240,000 in disgorgement and pre-judgment interest, without pleading guilty or pleading guilty to avoid tougher sanctions from regulators, according to the complaint. He was also banned from promoting any crypto asset securities for three years.
The SEC accused Pierce of fraudulently promoting the purchase of EMAX tokens without publicly disclosing that EthereumMax paid him more than $244,000 in EMAX for the promotion.
The defendants even posted screenshots of a fake account showing substantial profits and holdings using EMAX. However, this is all fake because "his own personal holdings are actually much lower than in the screenshot." SEC Chairman Gary Gensler said the lawsuit serves as a reminder to all influential and famous people that authorities are vigilant and ready to take action against those who use their fame to facilitate the purchase of unregistered securities.
Additionally, he urges investors to do their own research before believing "investment opportunities" advertised by celebrities, as they often encourage investments that can result in millions of dollars lost.
Gurbir S. Grewal, Director of the SEC’s Enforcement Division, stated that U.S. law has clear regulations on the promotion of encrypted asset securities. Therefore, celebrities and anyone else must report the nature, source, and compensation received for promoting cryptocurrencies. Celebrities ranging from model and influencer Kim Kardashian to famous boxer Floyd Mayweather Jr. have faced SEC scrutiny for promoting unregistered securities in crypto assets.
In early October 2022, Kardashian agreed to pay a $1.26 million fine for using social media to promote her investment in EthereumMax without disclosing that she had received a $250,000 payment for it. Paul Pierce follows the same modus operandi.
In Mayweather’s case, he used the “Love” sign to promote multiple crypto assets, including EMAX, and did not disclose that he was paid $200,000.
The SEC has increasingly cracked down on those who market securities, even in the form of crypto assets, without disclosing their compensation. Pierce and others demonstrate that even celebrities can't act outside the law, and that regulators will act when necessary to protect investors from fraudulent practices.
