The Securities and Exchange Commission (SEC) recently issued two warnings about investments sold on the basis of celebrity endorsements, including one relating to initial coin offerings (ICOs), and followed up with enforcement actions against unregistered ICOs.
Investors can be misled by biased promotions. Receipt of cash or other consideration in exchange for promoting a security can create an incentive to describe the security in an attractive light, regardless of associated risks, costs and fees. Promoters of ICOs that are securities must fully disclose any consideration received, including the type (i.e., cash or securities), amount and the identity of the party making the payment, in order to comply with federal securities laws.
To read the full Goodwin Client Alert, click here.