Former NBA Star Settles SEC Charges for Failing to Disclose Crypto Ad Compensation

Former NBA star Paul Pierce settled SEC charges that he unlawfully advertised a crypto asset security on social media without disclosing his compensation and made misleading statements about his holdings of the asset.

According to the Order, the SEC found that Mr. Pierce did not disclose that he had been paid for participating in an advertisement. The SEC said that by failing to disclose the consideration he was paid, and because he advertised a securities offering "without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof," Mr. Pierce violated Securities Act Section 17(b) ("Fraudulent interstate transactions - use of interstate commerce for purpose of offering for sale").

In addition, the SEC found that Mr. Pierce made materially misleading statements regarding his investments in the advertised asset, misleading consumers about (i) the amount he had earned from holding the crypto asset security and (ii) his intent to continue holding and invest more money in the asset. According to the Order, Mr. Peirce was in fact simultaneously selling the securities, which the SEC determined was in violation of Securities Act Section 17(a)(2) ("Fraudulent interstate transactions - use of interstate commerce for purpose of fraud or deceit").

To settle the charges, Mr. Pierce agreed to (i) cease and desist, (ii) a three-year prohibition on accepting compensation for advertising a crypto asset securities offering and (iii) a civil monetary penalty of $1,150,000, with prejudgment interest of $15,449 and disgorgement of $244,116.

SEC Director of Enforcement Gurbir S. Grewal said that "[t]he federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source, and amount of compensation they received in exchange for the promotion."