On August 4, 2023, a notable settlement was reached in the realm of cryptocurrency. Celebrity singer Austin Mahone entered into an agreement with the U.S. Securities and Exchange Commission (SEC), following allegations of a breach of the anti-touting provision of the Securities Act of 1933.
The case commenced in the U.S. District Court for the Southern District of New York (SDNY), where Mahone was sued by the SEC. The commission alleged that Mahone did not disclose he was compensated for promoting a cryptocurrency asset on his Twitter platform.
Critically, the SEC stated that Mahone was paid directly for his promotional tweet; a point directly linked to the heart of the anti-touting case. Initially, it was claimed that Mahone was paid up to $20,000 for the tweet, however, the actual payment turned out to be $7,500.
The anti-touting provision of the Securities Act seeks to protect potential investors from promotions that may appear to be unbiased endorsements or reviews, when in reality they are paid promotions.
The case against Mahone serves as an important reminder for celebrities and influencers, who are increasingly approached to promote crypto assets. The SEC is actively monitoring such activities and has demonstrated that it will penalize those who fail to make appropriately clear disclosures around paid endorsements.
It is worth noting that failure to adhere to the act can lead to serious consequences, including heavy fines and legal repercussions. Stakeholders involved in the promotion of such assets can all potentially face such consequences, emphasizing the importance of full, fair and transparent disclosures.
For the full legal details, you can review the case here.