Joining a list of other celebrities to jump into the financial investment or fintech space, action movie star Steven Seagal is one that also faced charges for nondisclosure of compensation. Over the last few years, celebrity endorsements have increased, as financial industry companies and start-ups look to court millennial investors and position themselves as a lifestyle brand. To protect investors, the Securities and Exchange Commission (SEC) continues to actively pursue charges when celebrities don’t reveal payments for promotional work.
Movies Mimic Life
The SEC was Out for Justice after Mr. Seagal failed to disclose the payments he received for promoting the initial coin offering (ICO) of a new cryptocurrency: Bitcoiin2Gen (B2G). Yes, that’s “Bitcoiinn” not “Bitcoin.” In exchange for promoting the ICO, Mr. Seagal was promised $250,000 in cash and $750,000 worth of B2G tokens. He then encouraged the public on social media not to “miss out” on the ICO and issues a press release titled “Zen Master Steven Seagal Has Become the Brand Ambassador of Bitcoiin2Gen,” which stated that he endorsed the ICO “wholeheartedly.”
Unfortunately for Mr. Seagal, his payday was Marked for Death as it came six months after the SEC’s 2017 DAO report warning that cryptocurrency coins and tokens sold in ICOs may be securities. In line with the anti-touting provisions, any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion.
Without admitting or denying the SEC’s findings, Seagal agreed to take a Machete to his ill-gotten gains. He paid $157,000 in disgorgement, which represents his actual promotional payments, plus prejudgment interest, and a $157,000 penalty. Mr. Seagal also agreed not to promote any securities for three years.
The SEC OCIE has repeatedly cautioned the public to be wary of celebrity endorsements and always to research on their own, especially when dealing with the emerging field of cryptocurrencies promising unrealistic returns.
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