DJ khaled and Floyd Mayweather promoted multi-million dollar Centra Tech cryptocurrency scam
According to website TMZ, the lawsuit claims the celebrities' endorsements of a firm called Centra Tech on Twitter and Instagram resulted in fans ultimately losing millions of pounds.
Mr Mayweather promoted the project on Twitter and Instagram, telling his nearly 8million followers on Twitter in September 2017: "Centra's ICO starts in a few hours. Get yours before they sell out, I got mine."
Meanwhile, Mr Khaled reportedly called the company and its products a "game changer" to his over 12million Instagram followers.
The post has since been deleted.
Centra Tech co-founders, Sohrab "Sam" Sharma and Robert Farkas, were charged by the American investment watchdog in April this year with setting up a fraudulent initial coin offering (ICO).
ICOs are a digital way of raising funds from the public where cryptocurrency is exchanged for a "coin" or "token" related to a specific firm or project.
In this instance, Centra Tech claimed that the money raised would be use to create financial products – including a debit card backed by Mastercard and Visa that would convert hard-to-spend cryptocurrencies into US dollars or other legal tender.
It raised more than $32million (£25million) from thousands of investors last year.
But watchdog, the Securities and Exchange Commission (SEC), says Centra Tech had no relationships with Visa or MasterCard.
It also believes the founders created fictional executives with impressive biographies, posted false or misleading marketing materials to Centra's website, and paid celebrities to tout the ICO on social media.
What is Bitcoin?
- Bitcoin is a virtual currency
- It's traded between people without the help of a bank
- Every transaction is recorded in a public ledger, or 'blockchain'
- Bitcoin is created by mining
- Mining involves solving difficult maths problems using computer processors
- Bitcoin can be traded anonymously, which makes it a popular way of funding illegal activities
- A single Bitcoin is worth just under £5,000 today, but the value fluctuates wildly
- Bitcoin is one of many different cryptocurrencies, but by far the most popular
The UK's financial watchdog, the Financial Conduct Authority, issued a warning about ICO tokens in September 2017.
It said that like cryptocurrencies in general, these tokens can be “extremely volatile and vulnerable to dramatic changes” and in some cases, have no value at all.
In a blog post that looks to have been written by Centra Tech this August, the company disputed the allegations made against it by the SEC.
It stated: "We allege, think, and/or believe that the comments from SEC Chief of Enforcement, Robert Cohen, regarding our technology are down right wrong."
The Sun has contacted both Mr Mayweather and Mr Khaled's representatives.
In related news, rapper Akon is building a "futuristic" new city in Senegal where the entire economy will be reliant on his cryptocurrency AKoin.
Meanwhile, fraudsters hijacked business magnate Elon Musk's Twitter account earlier this year and posted links to shady cryptocurrency web pages.
For more on cryptocurrencies, read our piece on what is Bitcoin, why has the price collapsed and how can you buy the cryptocurrency?
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