By Arne K. Lang
On Thursday afternoon, Nov. 29, the United States Securities and Exchange Commission announced that a settlement had been reached with boxer Floyd “Money” Mayweather regarding his endorsement of a shady cryptocurrency start-up. The fine, totaling $614,775, was $300,000 for “disgorgement,” a $300,000 penalty, and $14,775 in interest.
The figure amounts to a drop in the bucket for Mayweather who has been named the highest paid athlete in the world by Forbesfour times in the last seven years.
Cryptocurrency is digital cash. It is an alternate form of currency. The leading purveyor, trailblazing Bitcoin, founded in 2009, spawned a wave of imitators that currently number more than 200.
In 2017 the SEC ruled that initial offerings in cryptocurrency fell under the rubric of securities and thus anyone promoting them must disclose his financial relationship to the company. As an investment, cryptocurrencies are known for being highly volatile. Leading internet platforms in the United States, China, and Japan have banned cryptocurrency advertisements.
Mayweather allegedly received $100,000 each from three different cryptocurrency start-ups, but at the heart of the SEC lawsuit was his failure to disclose his payment from a company called Centra Tech Inc. Mayweather, who reportedly has 22.3 million followers on Instagram and 7.85 million followers on Twitter, touted Centra Tech as a sure thing. “Get yours (Centra tokens) before they sell out,” he wrote. “I got mine and as usual I’m going to win big with this one.”
Mayweather’s paid endorsement was credited with helping Centra Tech raise $32 million with their initial coin offering. However, an expose by Nathaniel Popper, published in the New York Times on Oct. 27 of last year, revealed that all was not kosher at the company’s Miami Beach headquarters.
The company claimed they were working with Visa and Mastercard to issue a Centra Tech debit card. This was false. A senior executive pictured in the company’s prospectus was fictitious. Moreover, 25-year-old co-founder Suhrab “Sam” Sharma had had numerous brushes with the authorities in Miami “on allegations of unpaid bills and business deals gone sour; Twice, people have accused him in court of trying to fraudulently sell or lend them cars that he didn’t own and twice he has been evicted for claims that he failed to pay rent.”
The Times article gave rise to a class action lawsuit. In April of this year, Sharma and co-founder Robert Farkas were arrested on federal charges of wire fraud and related activities.
In Las Vegas, there has always been speculation that Mayweather has a hidden interest in VIP Sports, a telemarketing company whose office sits adjacent to the Mayweather Gym in a Chinatown industrial park. Employees of VIP Sports use high-pressure sales tactics to sell “winning” selections to gamblers. Mayweather has never officially endorsed V.I.P. Sports, which was once the subject of a short-lived reality show on CNBC, but he did appear in one of the company’s podcasts.
VIP Sports is run by Darin Notaro who uses the name Steve Stevens for business purposes. On Aug. 25, 1999, a story in the Las Vegas Sun reported that Notaro was sentenced by a district judge to one year in jail for a telemarketing scam whereby folks were told that they had won a valuable prize which they could unlock by sending him a sum of money. According to the story, the investors, primarily elderly people, were bilked of at least $234,000.
Other celebrities have endorsed cryptocurrency and one surmises they are now in the crosshairs. As terms of his settlement with the SEC, Mayweather neither admits nor denies the allegations against him. However, he is prohibited from promoting securities, digital or otherwise, for a period of three years.