Celebrities Mayweather and Khaled, Fined by the SEC, But Dismissed from Private Civil Lawsuit

May 20

We previously reported that, in November 2018, in a first of its kind case, the SEC charged  celebrities DJ Khaled and Floyd Mayweather with touting violations involving ICOs. Without admitting or denying the findings, Mayweather and Khaled agreed to pay disgorgement, penalties and interest.  One of the ICOs that they touted was Centra Tech.  They were also sued for securities law violations in a civil case brought by Centra Tech investors.

The case was based on activities of the defendants such as the following. Mayweather posted a tweet with a picture of himself holding a Centra Tech debit card and captioned the picture: “Spending bitcoins Ethereum and other types of cryptocurrency in Beverly Hills…”  Mayweather also tweeted “Centra’s (CTR) ICO starts in a few hours. Get yours before they sell out, I got mine.” Khaled, for example, posted a picture of himself holding the Centra Tech debit card on his Instagram account with a caption that read, “I just received my titanium centra debit card. The Centra Card & Centra Wallet app is the ultimate winner in Cryptocurrency debit cards powered by CTR tokens! ”

On May 13, 2019, the court granted motions to dismiss brought by Mayweather and Khaled.  The court focused on whether the defendants “solicited” the plaintiffs.  In holding that they did not, the court noted the following with respect to Mayweather:

The Plaintiff’s complaint fails to establish that Mayweather ‘successfully solicited’ the Plaintiffs to purchase CTR Tokens. […] There are no allegations that this was a successful solicitation, that Mayweather had any contact with Plaintiffs, or that Plaintiffs even saw the posts. . .  Mayweather has no relationship with the Plaintiffs. The complaint does not allege that Plaintiffs follow Mayweather’s twitter account or that they saw his posts or video with Centra Tech.

Indeed, two of the two of the investors involved in the lawsuit had actually purchased their CTR tokens before Mayweather began promoting the ICO.  Khaled was dismissed from the case for similar reasons.

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David Zaslowsky has a degree in computer science and, before going to Yale Law School, was a computer programmer. He is currently the Chairman of the Litigation Department of the firm’s New York office. His practice focuses on international litigation and arbitration. He has been involved in cases in trial and appellate courts across the United States and before arbitral institutions around the world. Many of David’s cases, including some patent cases, have related to technology. Since 2008, David has been included in Chambers for his expertise in international arbitration.

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