The US regulator said film producer Ryan Felton and rapper and actor Clifford Harris, known as T.I. or Tip, and the others, were involved in two platforms, FLiK and CoinSpark.
The SEC alleged that Felton promised to build a digital streaming platform for FLiK, and a digital-asset trading platform for CoinSpark.
Instead, Felton allegedly misappropriated the funds raised in the ICOs. The complaint also alleges that Felton secretly transferred FLiK tokens to himself and sold them into the market, reaping an additional $2.2m in profits, and that he engaged in manipulative trading to inflate the price of the CoinSpark tokens.
Felton allegedly used the money to buy a Ferrari, a million-dollar home, diamond jewelry, and other luxury goods.
The SEC said that T.I. offered and sold FLiK tokens on his social media accounts, falsely claiming to be a FLiK co-owner and encouraging his followers to invest in the FLiK ICO.
T.I. also asked a celebrity friend to promote the FLiK ICO on social media and provided the language for posts, referring to FLiK as T.I.’s ‘new venture’.
The regulator said T.I.’s social media manager offered and sold FLiK tokens on T.I.’s social media accounts, and that two other people promoted tokens without disclosing they were promised compensation in return.
Carolyn Welshhans, SEC associate director in the division of enforcement, said: ‘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.
‘As alleged in the SEC’s complaint, Felton victimised investors through material misrepresentations, misappropriation of their funds, and manipulative trading.’
Felton has been charged with violating registration, antifraud, and anti-manipulation provisions of the federal securities laws. FLiK and CoinSpark are charged with violating registration and anti-fraud provisions.
The SEC order requires T.I. to pay a $75,000 civil monetary penalty and not participate in offerings or sales of digital-asset securities for at least five years.
Three others have agreed to pay a penalty of $25,000 and to conduct-based injunctions prohibiting them from participating in the issuance, purchase, offer, or sale of any digital asset security for a period of five years.