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SEC Settles Charges Against Paul Pierce for Unlawful Touting of Crypto Assets
Practical Law Legal Update w-038-5842 (Approx. 5 pages)
SEC Settles Charges Against Paul Pierce for Unlawful Touting of Crypto Assets
by Practical Law Finance
| Published on 22 Feb 2023 • USA (National/Federal) |
As part of the SEC's efforts to pursue celebrities who unlawfully tout securities, the agency settled charges against Paul Pierce, former professional basketball player and sports analyst, for unlawfully touting EMAX crypto tokens.
- On May 24, 2021, EMAX and its agents began transferring EMAX tokens to Pierce in exchange for his agreement to make social media posts promoting EMAX tokens.
- Pierce accepted the tokens as compensation for his promotional services instead of payments in dollars.
- Between May 26, 2021, and June 5, 2021, Pierce promoted EMAX offerings on Twitter.
- Pierce negligently made materially false and misleading misstatements in his Twitter posts promoting the token, which the SEC asserted is a crypto-asset security, including:
- the amount he earned from holding the EMAX tokens; and
- that he was holding, with intention to increase, his investment in EMAX tokens while he was simultaneously selling the securities.
According to the order, the EMAX tokens were sold as investment contracts, making them securities under Section 2(a)(1) of the Securities Act, and Pierce did not disclose the payment for the promotion, which constitutes a violation of the anti-touting provision of Section 17(b) of the Securities Act of 1933, as amended (Securities Act) (15 U.S.C. § 77a et seq.). The SEC also alleged that Pierce’s conduct violated Section 17(a)(2) of the Securities Act, which prohibits obtaining money or property by means of an untrue statement of a material fact or any omission of material facts in the offer or sale of securities.
Pierce was ordered to disgorge the $244,116 he was paid for the promotion, as well as payment of prejudgment interest of $15,449, and a civil money penalty in the amount of $1,150,000. The settlement terms also provide that Pierce is proscribed from paid promotion of crypto assets for three years from the date of the order.
In a press release about the Pierce settlement, SEC Chair Gary Gensler indicated that the Pierce case serves as a reminder to celebrities about the requirement to publicly disclose payments for securities promotions. In addition, in the same release, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, indicated that federal securities laws require, and investors are entitled to disclosure of compensation received by celebrities in exchange for the promotion of securities.
For further information on SEC regulation of digital assets, see Practice Note, SEC Regulation of Digital Assets.