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US SEC warns against celebrity ICO endorsements

The U.S. Securities and Exchange Commission (SEC) has issued an official statement on the potentially unlawful endorsements of Initial Coin Offerings (ICOs) and other such investments by celebrities.

The SEC said that the promotional activities by celebrities may be unlawful if they do not disclose the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement. It also said that although celebrity endorsements may appear unbiased, but instead may be part of a paid promotion.

“The SEC’s Enforcement Division and Office of Compliance Inspections and Examinations encourage investors to be wary of investment opportunities that sound too good to be true. We encourage investors to research potential investments rather than rely on paid endorsements from artists, sports figures, or other icons,” it said.

The recent warning follows the investigative report published by the SEC in July which stated that virtual tokens or coins sold in ICOs may be securities, and those who offer and sell securities in the U.S. must comply with the federal securities laws. Accordingly, any celebrity or individual promoting a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion.

“A failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws,” the SEC said. “Persons making these endorsements may also be liable for potential violations of the anti-fraud provisions of the federal securities laws, for participating in an unregistered offer and sale of securities, and for acting as unregistered brokers.”

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