The Securities and Exchange Commission (SEC) has charged Paul Pierce, a former NBA player, with violating federal securities laws by making false and misleading statements about EthereumMax, a crypto token. The charges allege that Pierce failed to disclose a payment of over $244,000 of EthereumMax (EMAX) and tweeted misleading statements related to EMAX.

Pierce’s Violations

The SEC found that Pierce violated the anti-touting and anti-fraud provisions of federal securities laws by not disclosing his payment for promoting investment in securities, and for making false and misleading statements about EMAX. The order found that Pierce tweeted a screenshot of an account showing large holdings and profits without disclosing that his own personal holdings were much lower. Additionally, one of Pierce’s tweets contained a link to the EthereumMax website, which provided instructions for how potential investors could purchase EMAX tokens.

Penalties for Pierce

Without admitting or denying the SEC’s findings, Pierce has agreed to pay a $1.1 million penalty and approximately $240,000 in disgorgement and prejudgment interest. Pierce has also agreed to not promote any crypto asset securities for three years.

Other Celebrity Crypto Endorsers

During the 2021 crypto bull run, numerous celebrities increased the hype around digital assets by endorsing various crypto tokens on their social media platforms. Other notable celebrity crypto endorsers have included Matt Damon, Tom Brady, Mike Tyson, Reese Witherspoon, Mark Cuban, DJ Khaled, Floyd Mayweather, Justin Bieber, and Madonna.

Investor Caution

The SEC’s Chair, Gary Gensler, has emphasized that investors should be cautious when celebrities endorse investment opportunities, including crypto asset securities. Investors should research if the investments are right for them and should know why celebrities are making those endorsements.

Decrease in Investor Comfort with Cryptocurrencies

According to a poll by Bankrate from September 2022, U.S. investor comfort with cryptocurrencies has decreased since last year, particularly among millennial and Gen-Z investors who use social media as a primary investing source. Between 2021 and September 2022, comfort with cryptocurrencies fell by 41% for millennials.