On September 11, 2020, rapper T.I. released a new single called “Ring” featuring fellow Atlanta-based rapper Young Thug. The very same day, T.I. had to face the music and settle with the SEC, in response to findings that he had participated in the sale of unregistered securities. On September 10, 2020 the SEC also brought a complaint against T.I.’s associate Ryan Felton, and three other Atlanta-based individuals, for offering fraudulent and unregistered offerings. T.I., whose real name is Clifford Harris, agreed to pay a $75,000 settlement, and to not promote any more digital asset securities for at least the next five years.
The trouble for Harris began when he and his social media manager, William Sparks Jr., started promoting a new venture called FLiK, a streaming service helmed by film producer and studio owner Ryan Felton. FLiK’s white paper presented Felton and Harris as having the entertainment industry experience necessary to make the project a success. Facebook ad campaigns and Twitter posts advertised FLiK as a company co-owned by Harris, which it was not.
Their deception allegedly didn’t stop with Harris. Felton allegedly requested that Harris have another well-known but unnamed American actor, comedian, and producer promote FLiK on his social media accounts. According the SEC, this “substantially amplified the reach of FLiK’s marketing campaign.” Felton also made misleading statements about another industry bigwig, who was perhaps fully fictional: “FLiK has another co-owner, but we can’t name him just yet,” Felton stated on social media. The new co-owner, he says, “currently owns a large stake in another video stream platform (one you’ve heard of).” The SEC alleges that FLiK never had a co-owner.
In a video promo, FLiK is described as a streaming platform where creatives can upload their TV shows and films, and then earn from “Rentals, purchases, and subscriptions.” Felton described it as a video streaming service that would function like “Netflix on the blockchain.” But the SEC alleges that Felton made “materially false and misleading statements about FLiK.” FLiK had not yet been built, and Felton has since admitted that “he had no discussions with the production studios with which he claimed to be finalizing agreements.”
A spokesperson for Harris said, “Mr. Harris regrets his involvement with Mr. Felton. He attempted to help a local entrepreneur who presented an innovative idea for a streaming online platform that would help reduce the barriers of entry for creators of music and video content. Regrettably, Mr. Felton apparently never built the platform he promised T.I. and many others, and instead sought to profit from Mr. Harris’s popularity and reputation. Mr. Harris never took a dollar from Mr. Felton’s failed venture and immediately removed his name from it once he learned that the project was undeveloped. Mr. Harris responded to all inquiries made by the SEC, and the settlement announced today is in full satisfaction of that investigation. Mr. Harris will continue to look for ways to help new artists gain access to digital distribution.”
Felton and Sparks raised approximately $164,665 worth of cryptocurrency in exchange for FLiK “tokens.” Felton sold these tokens as investments, which is part of what landed him in trouble with the SEC. The SEC regulates the sale of securities, and companies cannot sell securities that aren’t registered through the SEC, unless they have a reason for exemption — for instance, a company can sell unregistered stock to executives and board members. It might also make a “private offering” to qualified investors, who are individuals with a high net worth or who have passed exams necessary to become a broker.
Felton marketed FLiK tokens to a much broader audience. He then transferred the proceeds to his personal accounts, which the SEC alleges he used to buy a Ferrari, a luxury home, and diamond jewelry. He also transferred money to family members, who are named as Relief Defendants.
FLiK wasn’t Felton’s only foray into the world of fabricated cryptocurrency opportunities. In October 2017, Felton started working on a similar endeavor called “CoinSpark.” The SEC alleges that from February to March of 2018, Felton and CoinSpark raised $282,418 worth of cryptocurrency by selling unregistered securities called “Spark tokens.”
Two other defendants, Owen Smith and Chance White, both described in the Complaint as “film industry workers,” promoted CoinSpark under false names, without disclosing that Felton had promised them full-time jobs with CoinSpark if the offerings raised sufficient funds. Once again, Felton transferred the cryptocurrency to his account, before converting the currency to US dollars and transferring money to his personal accounts. He did the same with unsold Spark tokens, placing them in a blockchain address under his control.
The SEC Complaint further states that in early April 2018, Felton engaged in matched trades, in an effort to create the appearance of trading activity in Spark tokens. The SEC alleged this was meant to increase their trading price and make them look like a more attractive purchase.
After offering the unregistered digital asset securities, Felton raked in $3 million.
The SEC seeks a final judgement for Felton to return his ill-gotten gains and to prohibit Felton from acting as an officer or director of any public company.
It’s unsurprising that Harris took an interest in Felton’s blockchain projects — the rapper has always had an eye for diverse opportunities. For instance, he is slated to teach a “Business of Trap Music” course at Clark Atlanta University. He has said of the course, “Drugs have existed for as long as humans have been on earth and music has existed for quite some time as well. The commonality that threads the two together is what makes trap music a dominant force in culture today.”
Harris also dispenses financial advice to his followers. On September 9, Harris put a video on his Instagram where he gave his thoughts on what people should do with their pandemic relief checks: “No more Cartier, and no more Louis Vuitton. Please go buy some property. It could just be a patch of dirt. Just buy it and hold it.”
It’s hard to predict the worthiness of an investment in a patch of dirt, but it’s definitely not the worst recommendation Harris has made to his young fans.