Dear Floyd Mayweather, you’re why the SEC exists
Dear Floyd Mayweather,
While perusing Facebook, I chanced across your post drumming up interest in the upcoming Stox initial coin offering (ICO). I understand your motivations in wanting to diversify your portfolio of investments, but I caution that your actions are reckless and potentially financially damaging to you and your fans.
ICOs, like any other securities offering, come with risks. The financial diligence on a traditional IPO takes months and involves hundreds of legal and financial experts. Even still, things go wrong all the time. The SEC recognizes that buying stock in private tech companies is more risky than buying stock in blue-chip companies. It’s for this reason that accredited investor rules have been put in place and information disclosure is such an integral part of a public offering.
The SEC exists to protect small investors, like your fans. Even with some regulation, very little precedent exists around ICOs and more rules are surely on the horizon. Propping up the value of a security when you have a financial stake in said security is regularly referred to as a “pump and dump.” 50 Cent once tried to pull off a similar scheme with a penny stock but found himself unable to dump the overvalued security after the markets turned to avoid breaking laws.
It’s impossible to know if Stox paid you to promote their ICO. It’d be fairly sleazy if they did, but either way, you have a responsibility to be forthcoming about what you stand to gain and what your passionate followers stand to lose.
If you’ve seen The Wolf of Wall Street, you’re probably familiar with the practice of selling penny stocks by heaving misleading information at potential investors that lack a strong background i...