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Enforcement News: SEC Charges Former NBA Star With Misleading Crypto Investors

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  • Posted on: Feb 22 2023

By: Jeffrey M. Haber

Celebrities often use their fame and likeness to promote goods and services. After all, it is a way to make extra money. 

Sometimes, when securities are involved, the celebrity will promote an investment opportunity without making any disclosure about whether they are paid for their endorsement. Even worse, the celebrity makes materially false and misleading statements about the investment opportunity. When the investment opportunity involves a virtual token or coin, the SEC’s Division of Enforcement and Office of Compliance Inspections and Examinations has said that “[a]ny celebrity or other individual who promotes a virtual token or coin that is a security” and who fails to “disclose the nature, scope, and amount of compensation received in exchange for the promotion” violates “the anti-touting provisions of the federal securities laws.”1 

In the Matter of Paul Anthony Pierce, SEC Release No. 11157 (Feb. 17, 2023), the SEC brought charges against former NBA player Paul Pierce (“Respondent”) for touting virtual tokens on social media without disclosing the payment he received for the promotion and for making false and misleading promotional statements about the same crypto asset.

As discussed in the SEC’s Order Instituting Cease-and-Desist Proceedings (here), Respondent promoted virtual tokens on his Twitter account in exchange for financial payment from the issuer. He received crypto asset securities worth approximately $244,116 for his promotions. At the time of his promotions, Respondent had in excess of approximately 4 million Twitter followers.

Specifically, Respondent allegedly promoted a securities offering conducted by EthereumMax, an online company with a public website (“EthereumMax” or the “Company”), in which it offered and sold digital “Emax tokens” (“EMAX”) to the general public. The EMAX tokens promoted by Respondent were offered and sold as investment contracts. According to the SEC, as such, these investment contracts were securities within the meaning of Section 2(a)(1) of the Securities Act of 1933.

Starting on or about May 14, 2021, EthereumMax made the EMAX tokens available for public trading on a so-called “decentralized” crypto asset trading platform.

According to the SEC, on May 24, 2021, EthereumMax and/or its agents began transferring EMAX tokens to Respondent in exchange for his agreement to make social media posts promoting the tokens. Respondent allegedly received at least eight (8) transfers of EMAX tokens through June 18, 2021. According to the SEC, Respondent accepted the tokens as compensation for his promotional services in lieu of payments in dollars.

On May 26, 2021, Respondent allegedly promoted EthereumMax’s offering on his Twitter page. The post contained a link to the EthereumMax website, where instructions were provided for potential investors to purchase EMAX tokens. The SEC said that Respondent did not disclose that he was compensated by EthereumMax for the promotion, nor did he disclose the amount and nature of the compensation. The SEC also said that the Tweet, in which Respondent compared his compensation with ESPN and the value of the crypto token was materially misleading. 

Two days later, Respondent posted another allegedly misleading statement on his Twitter account about the EMAX and failed to disclose the fact that the Company was compensating him for the promotion or the amount of the compensation. The SEC also claimed that Respondent failed to disclose that his own personal holdings were in fact far lower than the amount posted in the Tweet. 

Respondent made additional Tweets about the Company and the offering over the next several days. The SEC maintained that the information in those Tweets were materially false and misleading for substantially the same reasons. 

The SEC alleged that, in total, Respondent received approximately 1,622,319,996,192 EMAX tokens, worth approximately $244,116 at the time he received them, from EthereumMax and/or its agents in exchange for his promotional tweets.

In the order, the SEC found that Respondent violated the anti-touting and antifraud provisions of the federal securities laws. Without admitting or denying the SEC’s findings, Respondent agreed to pay a $1,115,000 penalty, prejudgment interest of $15,449, and approximately $240,000 in disgorgement. Respondent also agreed to not promote any crypto asset securities for three years.

“This case is yet another reminder to celebrities: The law requires you to disclose to the public from whom and how much you are getting paid to promote investment in securities, and you can’t lie to investors when you tout a security,” said SEC Chair Gary Gensler. “When celebrities endorse investment opportunities, including crypto asset securities, investors should be careful to research if the investments are right for them, and they should know why celebrities are making those endorsements.”

“The 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,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “Investors are entitled to know whether a promotor of a security is unbiased, and [Respondent] failed to disclose this information.”

A copy of the press release announcing the charges and settlement can be found here.


  1. See SEC Staff Statement Urging Caution Around Celebrity Backed ICOs (Nov. 1, 2017), available at https://www.sec.gov/news/public-statement/statement-potentially-unlawful-promotion-icos.

Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

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