Former NBA player Paul Pierce is paying $1.4 million to settle U.S. Securities and Exchange allegations regarding his misleading promotional statements about the crypto token EMAX. Pierce had failed to disclose that he received more than $244,000 to promote the EthereumMax crypto asset.
"The federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source, and amount of compensation they received in exchange for the promotion," said Gurbir S. Grewal, Director of the SEC's Division of Enforcement in a statement. "Investors are entitled to know whether a promotor of a security is unbiased, and Mr. Pierce failed to disclose this information."
Today we announced charges against former NBA player Paul Pierce for touting EMAX tokens on social media without disclosing the payment he received for the promotion and for making false and misleading promotional statements about the same crypto asset.— U.S. Securities and Exchange Commission (@SECGov) February 17, 2023
The SEC's order mentioned a tweet by Pierce that included a screenshot of an account showing large holdings and profits, as well as a link for potential investors to purchase EMAX tokens. Allegedly, the account in the screenshot was a lot larger than Pierce's own personal holdings and he failed to disclose it. The SEC concluded that Pierce violated the anti-touting and antifraud provisions of the federal securities laws, and he settled without admitting or denying the findings.
Pierce agreed to pay a $1,115,000 penalty and approximately $240,000 in disgorgement and prejudgment interest, according to the press release. The former Boston Celtics star also agreed to not promote any crypto asset securities for three years.
The SEC had release a statement in 2017 urging caution around celebrity backed Initial Coin Offerings, saying investors should be aware that celebrity endorsements may appear unbiased but could actually be part of a paid promotion.
"This case is yet another reminder to celebrities: The law requires you to disclose to the public from whom and how much you are getting paid to promote investment in securities, and you can't lie to investors when you tout a security," said SEC Chair Gary Gensler in a statement this week. "When celebrities endorse investment opportunities, including crypto asset securities, investors should be careful to research if the investments are right for them, and they should know why celebrities are making those endorsements."