It’s a rap on the knuckles as the US Securities and Exchange Commission (SEC) has made charges against five people and the firms FLiK and CoinSpark for fraudulent initial coin offerings (ICOs).
The people charged include film producer Ryan Felton, rapper and actor Clifford Harris, Jr., known as T.I. or Tip, and three others who each promoted one of Felton’s two unregistered and fraudulent ICOs.
Felton’s oeuvre is on IMDb but does not contain anything remotely famous. T.I. is more well-known if you’re into that kind of music – with some of his albums once riding high in the US Billboard 200 chart.
The SEC showed ‘No Mercy’ and also charged FLiK and CoinSpark, the two companies controlled by Felton that conducted the ICOs. Aside from Felton, all the individuals have agreed to settlements to resolve the charges against them.
Carolyn M. Welshhans, SEC’s Associate Director in the Division of Enforcement, states: “As alleged in the SEC’s complaint, Felton victimised investors through material misrepresentations, misappropriation of their funds, and manipulative trading.”
The SEC’s complaint alleges that Felton promised to build a digital-asset trading platform for CoinSpark. (FLiK is not related to fintech as that concerns a digital streaming platform.) Instead, Felton allegedly misappropriated the funds raised in the ICOs and engaged in manipulative trading to inflate the price of SPARK tokens. He allegedly used the funds he misappropriated and the proceeds of his distinct style of trading to buy a Ferrari, a million-dollar home, diamond jewellery, and other luxury goods.
In a settled administrative order, the SEC finds that T.I. offered and sold FLiK tokens on his social media accounts, falsely claiming to be a FLiK co-owner and encouraging his followers to invest in the FLiK ICO.
T.I. has a long history of crime – such as drugs, weapons, assault and public disorder. Ironically, he did act in the decent 2007 movie American Gangster.
Two other Atlanta residents, Chance White and Owen Smith, promoted SPARK tokens without disclosing they were promised compensation in return.
The charges include violating registration, antifraud, and anti-manipulation provisions of the federal securities laws. The order against T.I. requires him to pay a $75,000 civil monetary penalty and not participate in offerings or sales of digital-asset securities for at least five years.
The US Attorney’s Office for the Northern District of Georgia brought criminal charges against Felton in a parallel action.
The SEC reminds investors to be wary of celebrity endorsements and to always independently research investment opportunities.