It looks like he knew something about that.
The Securities and Exchange Commission (SEC) hit rapper T.I. (real name Clifford Harris Jr.), 39, and four other Atlanta-based men with civil charges in connection with the promotion of two “unregistered and fraudulent” initial coin offerings (ICOs).
ICOs, the SEC explains, are used “as a way to raise capital or participate in investment opportunities” for “new and efficient means for carrying out financial transactions,” namely cryptocurrency.
According to the SEC, film producer Ryan Felton’s “fraudulent” ICO for FLiK—”a company that would provide a streaming media platform with products and services that could be purchased with FLiK tokens”—were promoted “fraudulently” by T.I.’s social media manager William Sparks Jr. and T.I. himself.
The complaint said the FLiK was billed as “Netflix on the blockchain”:
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. also asked a celebrity friend to promote the FLiK ICO on social media and provided the language for posts, referring to FLiK as T.I.’s “new venture.”
The SEC said that T.I. violated Sections 5(a) and 5(c) of the Securities Act:
Section 5 of the Securities Act makes it unlawful for any person, directly or indirectly, to make use of interstate commerce to (a) sell a security without a registration statement in effect; or (c) offer to sell a security for which no registration statement has been filed. Harris violated Sections 5(a) and (c) of the Securities Act when he offered and sold FLiK digital asset securities without a registration statement being filed or in effect, and the offering did not qualify for any exemption from registration.
Chance White and Owen Smith were charged in connection with a separate ICO for CoinSpark, a company the SEC said was also controlled by Felton.
“Chance White and Owen Smith, promoted SPARK tokens without disclosing they were promised compensation in return,” the SEC said.
The SEC reached settlements with T.I., Sparks Jr., White and Smith but not with Felton.
As part of the settlement, T.I. was ordered to pay $75,000:
Payment shall be made in the following installments: (1) $15,000 within 10 days of entry of this Order; (2) $15,000 within 90 days of entry of this Order; (3) $15,000 within 180 days of entry of this Order; (4) $15,000 within 270 days of entry of this Order; and (5) the remaining amount, including all accrued post-order interest, within 365 days of entry of this Order. Payments shall be applied first to post order interest, which accrues pursuant to 31 U.S.C. 3717. Prior to making the final payment set forth herein, Respondent shall contact the staff of the Commission for the amount due. If Respondent fails to make any payment by the date agreed and/or in the amount agreed according to the schedule set forth above, all outstanding payments under this Order, including post-order interest, minus any payments made, shall become due and payable immediately at the discretion of the staff of the Commission without further application to the Commission.
According to a press release, Sparks Jr., White, and Smith “each agreed to pay a penalty of $25,000 and to conduct-based injunctions prohibiting them from participating in the issuance, purchase, offer, or sale of any digital asset security for a period of five years.”
Felton is accused of misappropriating funds raised through ICOs and “secretly transferr[ing] FLiK tokens to himself and s[elling] them into the market, reaping an additional $2.2 million in profits.” It was further alleged that Felton “engaged in manipulative trading to inflate the price of SPARK tokens.”
“Felton allegedly used the funds he misappropriated and the proceeds of his manipulative trading to buy a Ferrari, a million-dollar home, diamond jewelry, and other luxury goods,” the SEC said.
Felton’s companies, FLiK and CoinSpark, were themselves charged for allegedly “violating registration and anti-fraud provisions.” The film producer faces criminal charges in a “parallel action” that was filed in Georgia federal court.
[Image via Paras Griffin/Getty Images for Netflix/Allied Integrated Marketing]