T.I. settles with SEC over fraudulent initial coin offerings

Credit: AP

Credit: AP

Rapper T.I. has settled charges with the Securities and Exchange Commission related to his promotion of one of two unregistered and fraudulent initial coin offerings.

T.I. is required to pay a $75,000 civil monetary penalty and “not participate in offerings or sales of digital-asset securities for at least five years,” according to the SEC release.

The SEC said it found T.I. promoted Atlanta film producer Ryan Felton’s company FLiK, according to the news release.

The rapper, whose real name is Clifford Harris, was among five individuals who promoted one of Felton’s companies. Felton’s other company is CoinSpark. Both companies were also charged.

T.I. offered and sold FLiK tokens on his social media accounts and falsely claimed to be a FLiK co-owner, according to the SEC’s findings. He encouraged his followers to invest in the FLiK ICO and asked a celebrity friend to promote the ICO. He also provided language for the posts, which referred to FLiK as T.I.'s “new venture.”

According to the complaint, T.I.'s social media manager, William Sparks Jr., offered and sold FLiK tokens on T.I.'s social media accounts.

“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,” Carolyn M. Welshhans, associate director in the Division of Enforcement, said in a statement. “As alleged in the SEC’s complaint, Felton victimized investors through material misrepresentations, misappropriation of their funds, and manipulative trading.”

Other than Felton, all of the individuals agreed to settlements to resolve the charges against them, according to the release.

Felton was charged with violating registration, antifraud and anti-manipulation provisions of the federal securities laws. The companies are charged with violating registration and anti-fraud provisions.

According to the SEC’s complaint, Felton promised to build a digital streaming platform for FLiK and promised to build a digital asset trading platform for CoinSpark.

The complaint says that, instead of doing those things, Felton misappropriated funds raised in the ICOs and secretly transferred FLiK tokens to himself and sold them into the market, making $2.2 million in profits. He used the funds he misappropriated and the funds of manipulative trading from the other company to buy a Ferrari, a million-dollar home, diamond jewelry and other luxury goods, according to the SEC release.

Also this week, a federal grand jury indicted Felton on charges arising out of the two alleged cryptocurrency-based investment schemes, according to a Friday news release from BJay Pak, U.S. attorney for the Northern District of Georgia.

“This suspect misled investors to believe their money would fund two innovative ventures, but instead, every penny went to support the suspects lavish personal life style,” said Chris Hacker, Special Agent in Charge of FBI Atlanta, in the news release.

“To say that the DOJ’s allegations against Mr. Felton are grossly misplaced is an understatement,” said Felton’s attorney, Joshua Lowther. “We look forward to defending this case at trial.”

Felton said he could not comment “except to absolutely deny the accusations.”