Rapper Clifford Harris Jr., who performs under the name T.I., has settled charges with the Securities and Exchange Commission (SEC) related to his promotion of an initial coin offering (ICO).
A Friday press statement from the SEC detailed two fraudulent initial coin offerings — one for a digital streaming service FLiK and another for a trading platform called CoinSpark, with Atlanta-based film producer Ryan Felton presumably raised funds. Yet per the SEC statement, Felton "allegedly misappropriated the funds raised in the ICOs" and resulting in more than $2 million in losses for investors, per the Department of Justice.
"The complaint also alleges that Felton secretly transferred FLiK tokens to himself and sold them into the market, reaping an additional $2.2 million in profits, and that he engaged in manipulative trading to inflate the price of SPARK tokens," the SEC said. "Felton allegedly used the funds he misappropriated and the proceeds of his manipulative trading to buy a Ferrari, a million-dollar home, diamond jewelry, and other luxury goods."
According to the SEC, T.I. promoted the FLiK on his social media channels during the sale for that token.
Per a court order detailing the settlement:
"From August 20 through September 20, 2017, Harris, a well-known musician, actor, and producer, participated in the offer and sale of digital asset securities called FLiK tokens in an unregistered initial coin offering (the “FLiK ICO”). Posts on Harris’ social media accounts, and on the FLiK website and FLiK social media accounts, inaccurately referred to Harris as a coowner of FLiK and encouraged investors to participate in the FLiK ICO. These posts also provided links to the FLiK ICO website to facilitate investor participation in the FLiK ICO. Harris further arranged for his friend, a well-known actor, comedian, and producer, to promote the FLiK ICO on his friend’s social media accounts. Harris provided his friend with language that referred to the FLiK ICO as Harris’ “new venture.” Harris violated Sections 5(a) and 5(c) of the Securities Act by offering and selling securities without having a registration statement filed or in effect or qualifying for an exemption from registration."
Three other individuals — William Sparks, Jr., T.I.'s social media manager as well as Owen Smith and Chance White — were also charged, and all three of them reached settlements with the SEC. According to the statement, T.I. will pay a $75,000 civil penalty and has agreed "not participate in offerings or sales of digital-asset securities for at least five years." All of the settlements described by the SEC are subject to the court's approval.
Felton, per the SEC, has been charged with "violating registration, antifraud, and anti-manipulation provisions of the federal securities laws."
"The complaint seeks injunctive relief, disgorgement of ill-gotten gains, and civil monetary penalties, as well as an officer-and-director bar against Felton," the agency said. The Justice Department has also brought charges against Felton.
T.I. was previously named as a defendant in a civil suit over the FLiK ICO, but was ultimately cleared after a federal court dismissed that case in May 2019.