SEC sues former NBA star Paul Pierce for promoting EthereumMAX
Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here!
(Kitco News) - The U.S. Securities and Exchange Commission (SEC) announced on Friday that it has charged former NBA superstar Paul Pierce with failure to disclose a payment he received for the promotion of EMAX, a crypto asset security offered and sold by EthereumMax.
According to the SEC, Pierce touted the token on social media and made “false and misleading promotional statements” about the crypto asset to his Twitter followers. The regulator disclosed that the former basketball player was paid more than $244,000 in EMAX tokens to promote the project on social media.
The SEC’s order indicated that Pierce spread misleading statements related to EMAX, including tweeting a screenshot of an account showing large holdings and profits without disclosing that his own personal holdings were in fact much lower than those in the screenshot. One of Pierce's tweets also contained a link to EtherumMax’s website, which provided instructions for potential investors to purchase EMAX tokens.
The SEC’s order has determined that Pierce violated the anti-touting and antifraud provisions of federal securities laws.
"The federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source, and amount of compensation they received in exchange for the promotion," said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. "Investors are entitled to know whether a promotor of a security is unbiased, and Mr. Pierce failed to disclose this information."
Pierce did not confirm or deny the SEC’s findings but he has agreed to pay a $1,115,000 penalty and approximately $240,000 in disgorgement and prejudgment interest. He also agreed to not promote any crypto assets for three years.
Last October, the SEC charged celebrity influencer Kim Kardashian for her participation in the promotion of EthereumMax, alleging that she too violated the anti-touting provision of federal securities laws by promoting EMAX tokens on her Instagram profile while neglecting to disclose to authorities the payment she received for doing so.
While she agreed to pay $260,000 in disgorgement and another $1 million in penalties, Kardashian also neither admitted nor denied the SEC’s findings. She also agreed not to promote any cryptocurrency asset until 2025.
|SEC looks to increase investor protections with a newly proposed rule change|
The SEC’s investigation into the promotion of EthereumMax – which is being conducted by the Enforcement Division’s Crypto Assets and Cyber Unit in conjunction with the New York Regional Office – is ongoing.
“This case is yet another reminder to celebrities: The law requires you to disclose to the public from whom and how much you are getting paid to promote investment in securities, and you can’t lie to investors when you tout a security,” said SEC Chair Gary Gensler. “When celebrities endorse investment opportunities, including crypto asset securities, investors should be careful to research if the investments are right for them, and they should know why celebrities are making those endorsements.”
2023 has seen an uptick in enforcement actions by the SEC after years of what seemed to be a hands-off approach to regulating the growing crypto industry. Last week, the regulator charged Kraken with the unregistered offer and sale of securities for its staking program, effectively banning staking-as-a-service for all U.S.-based exchanges, and informed stablecoin issuer Paxos that it was the target of an enforcement action for its issuance of Binance’s BUSD stablecoin.