Hollywood actor Steven Seagal settles with SEC over securities law violations
Seagal touted on social media a security that was being offered and sold in an initial coin offering without disclosing that the issuer was paying him for the promotions.
The Securities and Exchange Commission (SEC) today announced settled charges against actor Steven Seagal.
From approximately February 12, 2018 through March 6, 2018, Seagal touted on social media a security that was being offered and sold in an initial coin offering (ICO) without disclosing that the issuer was paying him for the promotions. Seagal’s failure to disclose this compensation violated Section 17(b) of the Securities Act, which makes it unlawful for any person to promote a security without fully disclosing the receipt and amount of such consideration.
Seagal, age 67, is a U.S. national who is currently residing in Moscow, Russia. During the Relevant Period, he had approximately 107,000 Twitter followers and 6.7 million Facebook followers.
He promoted on his Twitter and Facebook accounts a security being sold through an ICO, allowed his likeness to be used on the ICO issuer’s official website and marketing materials, and participated in a webinar with potential investors in the ICO in exchange for payments from the ICO issuer.
Specifically, Seagal promoted a securities offering conducted through an ICO by Bitcoiin2Gen (B2G), an international online company, from approximately February 12, 2018 through March 26, 2018, in which it offered and sold digital tokens (B2G tokens) to be issued on the Ethereum blockchain. B2G offered and sold tokens that were investment contracts and therefore securities pursuant to Section 2(a)(1) of the Securities Act.
Pursuant to a contract between Seagal and the entity controlling B2G, Seagal was promised $250,000 in cash and $750,000 worth of B2G tokens in exchange for his promotion of B2G. In line with the Agreement, on February 12, 2018, B2G announced, via a press release, that Seagal would endorse its ICO. The press release quoted Seagal as saying: “I endorse this opportunity wholeheartedly . . . I am excited about the management, and especially about the secure blockchain, underlying mining technology, and safeguards.” Seagal’s quote in the press release did not disclose that he was being paid for the promotion.
Shortly thereafter, Seagal started promoting B2G’s ICO on social media by posting or authorizing his agents to post at least nine touts, including, for example a post on Facebook including a link to the press release on B2G’s newsroom page titled “Zen Master Steven Seagal Has Become the Brand Ambassador of Bitcoiin2Gen.” The post contained the caption: “From Team Seagal . . . Steven has just become the worldwide ambassador for the Bitcoiin 2nd Generation crypto currency.” The post also contained a link to participate in the ICO and a promotional code.
The Company paid Seagal approximately $157,000 for these promotions, pursuant to the Endorsement Agreement. Seagal did not, however, disclose in his posts any information about the fact or amount of compensation he received, or was to receive, from B2G for making the promotions.
Seagal’s promotion of the B2G ICO occurred more than six months after the Commission issued the DAO Report of Investigation indicating that virtual tokens or coins sold in ICOs may be securities, and thus, subject to the federal securities laws.
Seagal’s promotion of the B2G ICO occurred nearly four months after the Commission’s Division of Enforcement and Office of Compliance Inspections and Examinations issued a public statement reminding market participants that any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion, and that a failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws.
As a part of the settlement, Seagal has undertaken to forgo receiving or agreeing to receive any form of compensation or consideration, directly or indirectly, from any issuer, underwriter, or dealer, for directly or indirectly publishing, giving publicity to, or circulating any notice, circular, advertisement, newspaper, article, letter, investment service, or communication which, though not purporting to offer a security, digital or otherwise, for sale, describes such security. This is valid for a three-year period.
He also agrees to cease and desist from committing or causing any violations and any future violations of Section 17(b) of the Securities Act.
Seagal will also have to pay disgorgement of $157,000, prejudgment interest of $16,448.76, and a civil money penalty in the amount of $157,000 to the Securities and Exchange Commission.