Film producer Ryan Felton and Atlanta rapper T.I, whose real name is Clifford Harris Jr, are the latest celebrities being sued for their involvement in alleged fraudulent ICOs.
The US Securities and Exchange Commission said in a statement on Friday that the rapper and businessman alongside three others promoted two initial coin offerings called FLiK and CoinSpark.
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According to the SEC, Felton was the mastermind behind the entertainment streaming platform FLiK, and cryptocurrency trading exchange CoinSpark. He apparently orchestrated a ‘pump and dump’ scheme using investor cash and was ultimately blamed for plummeting the value of their associated tokens.
Further, it is alleged that Felton hyped FLiK and CoinSpark coins through ‘numerous false representations and material omissions’ including that that billionaire Mark Cuban would be getting involved in the project. Afterwards, he denied any association with the company, just after he sold the now-worthless tokens in mass amounts.
The complaint also alleges that musician producer racked in an additional $2.2 million in profits after he dumped the tokens on the secondary market and vanished. Felton, who was indicted on September 9, was also engaged in manipulative trading to inflate the price of SPARK tokens, the agency said.
While ICO investors collectively forked out a few million dollars for what turned out to be worthless tokens, Felton used their money to fund his extravagant lifestyle, including a $1.5 million house and a $180,000 red 2007 Ferrari 599 GTB Fioran Coupe.
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The complaint alleges that they were duped by Felton and T.I. through a series of social media posts and celebrity endorsements, as well as promises of nearly 25,000 percent return on their investments.
The agency also charges T.I.’s social media manager, William Sparks and two other Atlanta residents, Chance White and Owen Smith, of promoting SPARK tokens without disclosing they were promised compensation in return. The three men settled the case with the SEC and agreed to pay a penalty of $25,000 each alongside a five-year ban on their participation in any crypto-related activities. T.I. will pay a $75,000 civil penalty and has also agreed to a similar ban on dealing in digital-asset securities.
Felton and T.I. are not the first celebrities to be hit with an ICO-related lawsuit. Earlier in February, action film star Steven Seagal was fined for touting cryptocurrencies and acting as the brand ambassador for a controversial initial coin offering called Bitcoiin2Gen (B2G).
Seagal’s promotion followed an SEC warning in 2017 that coins sold as ICOs may be classed as securities and also warned about celebrity endorsements of such schemes.
At the time, ICO operators, and sometimes ‘scammers’, had been trying to capitalize on the intersection of celebs and cryptocurrency enthusiasts to grab money from investors in the hot market. The trend of celebrity endorsements even forced the SEC to release an official statement ordering the involved celebrities to disclose the nature, scope, and amount of compensation received in exchange for the promotion.