The Securities and Exchange Commission (SEC) indicted former NBA player Paul Pierce on February 17, 2023 for promoting and making false claims about EMAX tokens.
Paul Pierce made and promoted false and misleading promotional comments about EMAX, a token offered and sold by EthereumMax, on social media platforms. Pierce did not disclose how much he was paid for the promotion during the trial.
However, the SEC Order discovered that he received over $244,000 worth of EMAX tokens to promote the token on Twitter. Instead of admitting the charges, Pierce opted to settle the charges by paying $1.409 million that was imposed on him by the court as restitution, penalties and interest.
The SEC order also found that Pierce had tweeted malicious information about EMAX, including a screenshot of an account containing numerous tokens and profits.
Pierce did not share the holdings in his account which were, in fact, lower than those in the image. His tweets include a link to the Ethereum Max websitewhere potential investors would buy EMAX tokens by following the instructions.
The verdict
The SEC order found that the former NBA player violated the anti-fraud and anti-soliciting sections of federal securities laws.
These provisions state that the promoter must disclose all material information, certification of reports and financial statements of officers, “Section 10(b) of the Exchange Act and Rule 10b-5”. The provisions also cover liability for security offerings, false and misleading information and the liability of responsible persons.
The SEC investigation is being led by various SEC agents, including Jon A. Daniels, Pamela Sawhney, and an officer from the Enforcement Division’s Crypto Assets and Cyber Unit, Amanda Rios, who has found enough evidence against Pierce.
Pierce did not admit or deny the charges, but he agreed to pay $240,000 in restitution and prejudgment interest and a penalty of $1,115,000. He also agreed not to campaign for any crypto asset titles for the next three years.
Investigations are still ongoing under the supervision of Crypto Assets and Cyber Unit officers David Hirsch, Mark R. Sylvester and Jorge G. Tenreiro.
SEC Chairman Gary Gensler has issued a statement warning celebrities that the law requires them to share with the public the sponsor of any safety investment campaign they run and how much they earn from the campaign.
Celebrities also have no right to lie to investors when they walk away from safety. He also warned investors to watch out for celebrity-endorsed investment opportunities, including crypto-asset securities.
Investors should, however, do due diligence on investments and know what motivates public figures to make the endorsements.
SEC Law Enforcement Division Director Gurbir S. Grewal said federal securities laws state that anyone, including celebrities, promoting any asset security cryptographic must provide the source, nature and amount of compensation it received for the campaign.
The SEC official also pointed out that investors have a right to know about the biases of promoters. The failure to disclose these details is what got Pierce in trouble.
