Influencers- How To Avoid Having This Happen To You!

Floyd Mayweather Jr. and DJ Khaled Charged with Cryptocurrency Fraud

On Thursday, champion boxer Floyd Mayweather Jr. and music producer DJ Khaled, were charged with promoting cryptocurrency without disclosing they were both being paid to do so.

According to The Securities and Exchange Commission, both Mayweather and Khaled broke the law when they failed to disclose a combined total of $500K in payments to promote the cryptocurrencies.

Although this is the first time the SEC has brought charges against individuals for improperly promoting ICOs, it’s not the first time influencers have run into problems with the law for fraud and failing to disclose business and financial relationships. In fact, I talked about this very real problem these past two years when I spoke at Social Media Day San Diego.

In October, Fyre Festival co-founder, Billy McFarland, was sentenced to 6 years in prison and three years of probation. He was also ordered to pay  $26 million in restitution to victims.

If you’re an influencer and you’re interested in avoiding this from happening to you, here are a few tips to help keep you safe. If you’re a brand or social media agency engaged in influencer marketing, make sure everyone in the chain of your marketing effort, especially the influences, are following the law.

Now before we dive too deep in the post, please keep in mind that although I am a lawyer licensed to practice law in California, I’m not your lawyer. No legal advice is given in this article, and you should consult a qualified lawyer in your state with your questions or needs.

Having gotten that State Bar requirement out of the way, I’d like to share the following thoughts with you. Please keep in mind that this is a constantly changing area of the law and, conflict of laws and new court cases continue to keep all of us on our toes.

Influencers Need To Do This!

The Securities and Exchange Commission (SEC) and Federal Trade Commission (FTC) have disclosure rules you need to follow. This applies to individuals, PR companies and digital agencies.

Sponsored links, blog and social media posts, including live streaming, all fall under this disclosure requirement. In my opinion, social media take overs (when an influencer  takes over someone another person or company’s account) also can fall into this category. Influencers, brands, and agencies all need to make sure there is full transparency and disclosure.

This obligation for clear and conspicuous disclosure exist regardless of the platform. If you can’t disclose the true relationship in a 240 character tweet, then it’s not OK to send the tweet. Hashtags are not good enough. No excuses.

If a client will not allow you to give full disclosure, then don’t do the deal. The goal of the SEC and FTC disclosure rules is to make consumers aware of the fact that what they are reading or clicking on is an advertisement or, that they may be relying upon a business arrangement and subsequent social media post that was made because consideration (money or other value) was promised or exchanged hands.

Influencers Should Use Business Entities, Contracts, and Have Insurance

To add to your liability protection, in addition to following the law, smart influencers will also do business as a corporation or LLC. See my prior post for details. When done correctly, this will protect your personal assets from exposure to business liabilities. Please consult with a lawyer in your state to determine the best business entity for you.

Influencer liability can be managed and controlled by the proper use of contracts. Before allowing your name to be used, make sure you utilize a proper contract defining the full scope of your participation in the activity. Putting your agreement into writing is a good way to protect your interest and document the understanding of the parties. Doing this will also help you avoid misunderstandings down the road.


Make sure to follow SEC and FTC rules. Disclose your relationships. If you’re asked not to or, if you can’t do so (in a tweet for example), then don’t do the deal.

If you don’t do the above, you may be breaking the law. And if you break the law, you may end up like Floyd Mayweather Jr. and DJ Khaled.

Let’s not let that happen to you.


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Related Post:

“21 Clauses That Should Be In Every Influencer Marketing Contract”

Three Ways for Social Media and Digital Companies to Find a Good Lawyer

Nine Questions to Ask Before Hiring a Social Media Business Lawyer


jon mitchell jackson 400Mitch Jackson is a 2013 CA Lawyer of the Year and a 2009 OC Trial Lawyer of the Year. He is a legal change evangelist who shows lawyers, entrepreneurs, and yes, influencers, how to use social and live streaming to safely disrupt, hack and improve their practices and businesses. Connect with Mitch on Twitter, his firm, or over at his LegalMinds Mastermind.

Mitch’s new book,“The Ultimate Guide to Social Media For Business Owners, Professionals, and Entrepreneurs” is available on January 1, 2019. Click here for details.


Author: Mitch Jackson

I'm a California trial lawyer trying to fix the world one client, cause, and digital interaction at a time.

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