Popular Hollywood actor and producer Steven Seagal settled charges by the U.S. Securities and Exchange Commission (SEC) of failing to disclose the compensation he received for promoting an initial coin offering (ICO) in 2018.

Brand ambassador of Bitcoiin2Gen (B2G)

Between February 12 and March 6, 2018, Seagal promoted Bitcoiin2Gen’s ICO, exhorting his followers and the wider crypto community not to “miss out” on the offering.

The film action star was also mentioned in a press release titled “Zen Master Steven Seagal Has Become the Brand Ambassador of Bitcoiin2Gen,” according to the SEC’s order. The press release was posted as a link from Seagal’s Facebook account on February 19 and contained a caption that announced him as B2G’s brand ambassador.

Seagal was quoted as saying, “I endorse this opportunity wholeheartedly . . . I am excited about the management, and especially about the secure blockchain, underlying mining technology, and safeguards.”

In exchange for promoting B2G, Seagal was promised $250,000 in cash and $750,000 worth of B2G tokens, according to an endorsement agreement between the actor and Bitcoiin2Gen.

Seagal failed to disclose compensation

The SEC noted that nowhere in the press release – or anywhere else – did the actor mention that he was being compensated for his endorsement.

By not revealing the amount he received for promoting B2G’s ICO, Seagal violated Section 17(b) of the Securities Act that makes it “unlawful for any person to promote a security without fully disclosing the receipt and amount of such consideration.”

The SEC’s order also outlined 2 other such instances where Seagal was promoting the ICO on both Twitter and Facebook.

On February 28, 2018, Seagal posted a photo of himself on Twitter with the caption: “Congratulations @bitcoiin2gen for reaching 3/4 of their soft cap midway through the #ICO. Less than 30 days til the close. Don’t miss out.” The same post appeared on his Facebook account the following day.

One week later, on March 6, 2018, Seagal again took to Twitter, saying: “Friends, I wanted to announce that @Bitcoiin2Gen will soon be listed on some of the biggest exchanges globally. Stay tuned for more information coming very shortly.”

According to the SEC complaint, B2G intended to use the returns from the token offering “to build an ‘ecosystem’ that would create demand for B2G tokens and consequently make them more valuable.”

The official document also noted that not only did B2G’s marketing materials tout B2G’s management but also promised the investors a guaranteed investment return each month and a secondary trading market for B2G tokens after the ICO.

Seagal has agreed to pay a “disgorgement of $157,000, prejudgment interest of $16,448.76, and a civil money penalty in the amount of $157,000 to the Securities and Exchange Commission.”

Furthermore, he also agreed not to promote any securities for three years, though he neither admitted to nor denied the SEC’s findings.

SEC: No promoting without proper disclosure

According to the SEC’s press release, Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit, was in opposition to the celebrities using their social media following to “tout” securities, without disclosing the compensation they received for it. She said,

“These investors were entitled to know about payments Seagal received or was promised to endorse this investment so they could decide whether he may be biased,”

Although celebrities endorsing such investments might appear to be biased, they could just be paid a heavy compensation for the endorsement, making it unreliable investment advice.

In July 2017, the SEC released a DAO report, which warned that virtual token or coins sold in ICOs might be securities and that appropriate steps must be taken to ensure compliance with the laws. More than six months later, Seagal began promoting B2G.

In another official statement, the SEC also advised investors to “research potential investments rather than rely on paid endorsements from artists, sports figures, or other icons.”

Featured image courtesy of Flickr / Gage Skidmore