ATLANTA — The Securities and Exchange Commission has charged Atlanta-based film producer Ryan Felton and rapper/actor T.I., whose actual name is Clifford Harris Jr., in connection with two cryptocurrency-based investment schemes.
The SEC also charged FLiK and CoinSpark, two companies controlled by Felton that conducted what are known as initial coin offerings.
“Initial coin offerings can be used to fund innovative and exciting projects that might not otherwise be able to come to life through traditional funding sources,” said Byung J. “BJay” Pak, the U.S. Attorney for the Northern District of Georgia, which pursued a parallel complaint against Felton, 46, of Atlanta, that resulted in his indictment by a federal grand jury last week. “[Felton] promised investors a stake in innovative ventures and allegedly spent investor funds lavishly on personal expenses.”
The SEC complaint alleges that Felton promised to build a digital streaming platform for FLiK and a digital-asset trading platform for CoinSpark.
Instead, he allegedly transferred FLiK tokens to himself and sold them on the market for $2.2 million. He also allegedly engaged in manipulative trading to inflate the price of the SPARK tokens.
“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,” Carolyn M. Welshhans, the associate director in the SEC’s Division of Enforcement, said. “As alleged in the SEC’s complaint, Felton victimized investors through material misrepresentations, misappropriation of their funds and manipulative trading.”
Felton used the vast majority of the investor proceeds to fund an extravagant lifestyle, including all-cash purchases of a $1.5 million residence and a $180,000 red 2007 Ferrari 599 GTB Fioran Coupe. The government is seeking to forfeit the proceeds of his schemes and previously filed a civil forfeiture action, which is staying pending resolution of the criminal prosecution.
Three others were charged in the case: William Sparks Jr., T.I.’s social media manager; Chance White and Owen Smith, all of Atlanta.
Aside from Felton, all of the other defendants have agreed to settlements resolving the case against them.
Sparks, White and Smith each agreed to pay a penalty of $25,000 and to injunctions prohibiting them from participating in the issuance, purchase, offer or sale of any digital-asset security for five years.
The SEC’s order against T.I. requires him to pay a $75,000 civil penalty and not participate in offerings or sales of digital-asset securities for at least five years.