The US Securities and Exchange Commission (SEC) continues to bust illegal celebrities' endorsement of cryptocurrencies, as it recently charged and settled with former NBA player Paul Pierce for his promotion of EthereumMax's EMAX tokens, which are unregistered securities.

Former NBA Star Plays for Crypto Endorsement

The charges were brought as Pierce failed to disclose that he received more than $244,000 in EMAX as a payment for promoting the cryptocurrency on Twitter. Further, the regulator highlighted that Pierce tweeted misleading EMAX-related statements: he tweeted a screenshot of an account showing large holdings and profits from the token but did not disclose that his holdings are substantially lower.

It was the second high-profile celebrity endorsement bust related to EMAX tokens. Last October, the SEC charged Kim Kardashian for promoting unregistered securities and settled with her for a monetary penalty of $1.26 million. It also fined famous boxer Floyd Mayweather and rapper DJ Khalid for endorsing the $25 million fraudulent initial coin offering (ICO) of Centra Tech.

The latest charges against Pierce for violations of anti-touting and antifraud provisions of the federal securities laws led to the settlement with a payment of $1.4 million. Out of the total, about $1.12 million were penalties, whereas the remaining $240,000 were in disgorgement and prejudgment interest. On top of that, he agreed not to promote any digital asset securities for three years. However, Pierce did not admit or deny any wrongdoings.

"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 the Chair of SEC, Gary Gensler.

"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."

The Strict Rules against Unregistered Securities Endorsements

The SEC's rules are strict when it comes to the endorsement of unregistered securities. The retail crypto adoption skyrocketed the number of celebrity endorsements. Many of such endorsed projects were labeled unregistered securities and are now facing enforcement actions. Moreover, the SEC is fighting a long legal battle with Ripple, alleging that XRPs are unregistered securities.

Recently, the SEC brought against collapsed Terraform Labs and its CEO Do Kwon for running a "multi-billion dollar crypto asset securities fraud." The agency even sued Gemini and bankrupt Genesis for offering and selling unregistered securities in the form of crypto lending products.

"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 Grewal, the Director of the SEC's Division of Enforcement. "Investors are entitled to know whether a promotor of a security is unbiased, and Mr. Pierce failed to disclose this information."