The Securities and Exchange Commission (SEC) indicated its intention to crack down on celebrities promoting initial coin offerings (ICOs), by announcing settlements with DJ Khaled and Floyd Mayweather, who failed to disclose that they received payments in return for their social media posts.

Section 17(b) of the Securities Act makes it unlawful for any person to “publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service or communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof.”

Floyd Mayweather violated this provision on multiple occasions between July and September 2017 when he touted on social media three securities that were being offered and sold in ICOs, without disclosing that he was being compensated for the publicity, the SEC alleged.

For example, Mayweather, who had roughly 7.8 million followers at the time, posted on Twitter a picture of his boxing title belts with the caption: “Centra’s ICO starts in a few hours. Get yours before they sell out, I got mine…” He also recorded a video at a department store in Los Angeles that purported to show him using the so-called “Centra Wallet” app on an iPhone and a “Centra Card” to purchase several items.

Centra Tech, Inc., later posted the video to YouTube under the headline “Centra Floyd Mayweather Jr Spending Bitcoin with Centra Card & Centra Wallet.” Mayweather never disclosed that Centra paid him $100,000 for these promotions.

Mayweather previously plugged two other ICOs without disclosing his compensation, the SEC said, for which he earned another $200,000.

Khaled Khaled, better known as DJ Khaled, similarly ran afoul of Section 17(b), the agency alleged in a second action. On both his Instagram and Twitter accounts (with 12.4 million and 3.9 million followers, respectively), Khaled posted a picture of himself holding a Centra Card with the caption: “I just received my titanium centra debit card. The Centra Card & Centra Wallet app is the ultimate winner in Cryptocurrency debit cards powered by CTR tokens! Use your bitcoins, ethereum, and more cryptocurrencies in real time across the globe. This is a Game changer here. Get your CTR tokens now!”

According to the SEC, Khaled was paid $50,000 for the September 27, 2017, posts and did not disclose the fact or amount of consideration he received from Centra.

Neither man admitted to the findings of the SEC, but both agreed to pay disgorgement, penalties and prejudgment interest in a pair of cease and desist orders with a total of $614,775 for Mayweather and $152,725 for Khaled. In addition, both are banned from receiving or agreeing to receive any form of compensation or consideration to promote any securities (digital or otherwise) for a period of three years (Mayweather) and two years (Khaled).

Miami-based Centra is facing its own legal problems, as the SEC filed a civil action against the founders in April 2018 and the U.S. Attorney’s Office for the Southern District of New York filed parallel criminal charges.

To read the order in In the Matter of Floyd Mayweather, Jr., click here.

To read the order in In the Matter of Khaled Khaled, click here.

Why it matters: “These cases highlight the importance of full disclosure to investors,” Enforcement Division co-director Stephanie Avakian said in a statement about the SEC’s first cases to charge touting violations involving ICOs. “With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.” The SEC—which previously warned celebrities about the potential for enforcement action if they failed to disclose connections or affiliations when promoting stocks and other investments—noted that its investigation will continue.