A variety of rappers such as Nipsey Hussle, Ghostface Killah and even Old Dirty Bastard’s son have been endorsing cryptocurrencies over the past year.
However there is also a lot of fraud going on in the new industry, which has recently come under the scrutiny of the SEC, which subpoenaed over 80 companies last month, looking to root out suspicious practices.
Earlier this week, the two founders of a cryptocurrency endorsed by DJ Khaled and Floyd Mayweather were hit with a $32 million dollar fraud lawsuit. The SEC accuses a company called Centra of selling unregistered and investments using their so-called “CTR” token.
Centra raised millions by promising to produce a number of products, including a Visa or Mastercard, which could be used to instantly convert cryptocurrencies for purchases. The problem lies in te fact that Sohrab “Sam” Sharma and Robert Farkas, the founders of Centra, completely fabricated their biographies, and simply hired influencers to market their tokens.
Moreover, Centra overstated their relationship with Visa and MasterCard, since they don’t even have one.
“As we allege, the defendants relied heavily on celebrity endorsements and social media to market their scheme,” said Steve Peikin, Co-Director of the SEC’s Division of Enforcement. “Endorsements and glossy marketing materials are no substitute for the SEC’s registration and disclosure requirements as well as diligence by investors.”
Both men are charged with violating anti-fraud and registration laws.
DJ Khaled has since removed his Instagram and Tweets promoting Centra Yet, Floyd Mayweather’s posts still remain active.