US rapper and actor T.I. is one of five individuals charged over his role in a fraudulent cryptocurrency offering, after the Securities and Exchange Commission found he had promoted and sold tokens on his social media accounts.
Clifford Harris Jr, better known for his stage name T.I., has appeared in several films throughout his career and has released 10 studio albums. His successful singles include the likes of 2008 songs "Live Your Life", "Whatever You Like", "Dead And Gone" and "Swagga Like Us".
The SEC also charged film producer Ryan Felton, as well as three other Atlanta-based individuals, who each promoted the unregistered and fraudulent initial coin offering.
The regulator has also charged FLiK and CoinSpark, two companies controlled by Felton that conducted the cryptocurrency offerings with violating registration and anti-fraud provisions.
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All individuals involved in the fraudulent offering have agreed to settlements to resolve charges brought against them, except for Felton.
The SEC alleges that Felton promised to build a digital streaming platform for FLiK, as well as a digital-asset trading platform for CoinSpark - but instead he allegedly misappropriated the funds raised in the offerings.
The watchdog alleged the film producer secretly transferred FLiK tokens to himself and sold them for an additional US$2.2 million in profit. It also alleged he engaged in manipulative trading to inflate the price of SPARK tokens.
The SEC alleged that Felton used the proceeds of his "manipulative trading" to buy a multi-million dollar home, a Ferrari, diamond jewellery and other luxury goods.
"The federal securities laws provide the same protections to investors in digital asset securities as they do to investors in more traditional forms of securities," associate director in the division of enforcement Carolyn Welshhans said.
"As alleged in the SEC's complaint, Felton victimised investors through material misrepresentations, misappropriation of their funds, and manipulative trading."
Felton has been charged with violating registration, anti-fraud, and anti-manipulation provisions of the federal securities laws.
"The complaint seeks injunctive relief, disgorgement of ill-gotten gains, and civil monetary penalties, as well as an officer-and-director bar against Felton," the SEC said.
The US Attorney's office for the Northern District of Georgia has simultaneously brought criminal charges against Felton.
Meantime, T.I. was found to have offered, promoted and sold FLiK tokens on his social media accounts, and also falsely claimed to be a co-owner of the company.
According to the SEC, T.I. also asked a celebrity friend to promote the initial coin offerings on their own social media, while his social media manager William Sparks Jr offered and sold tokens on T.I.'s social media accounts. Sparks has been charged with violating registration provisions.
Two other Atlanta residents, Chance White and Owen Smith were also found to have promoted SPARK tokens without disclosing they had been promised compensation in return. They have been charged with violating registration and anti-touting provisions.
As part of the settlements, Sparks agreed to disgorge his ill-gotten gains plus interest, while Sparks, While and Smith each agreed to cough up a US$25,000 penalty. They will also be prohibited from participating in the issuance, purchase, offer or sale of any digital asset security for the next five years.
The SEC's settlement with T.I. will see him pay a US$75,000 civil monetary penalty, and he will also be prohibited from participating in offerings or sales of digital asset securities for at least five years.
According to Reuters in Washington, T.I. neither admitted nor denied the SEC's findings.
His attorney Henry Mazurek said T.I. regretted getting involved with Felton, whom he originally believed to be a local entrepreneur trying to help new artists enter the music industry.
Mazurek said the rapper "never received a dollar from Mr. Felton's failed venture and immediately removed his name from it once he learned that the project was undeveloped".