Lindsay Lohan, Jake Paul, Lil Yachty and Ne-Yo are among those hit with Securities and Exchange Commission (SEC) charges. They are accused of violating securities laws in touting cryptocurrencies.
Rounding out the list of celebrities charged includes Soulja Boy, Austin Mahone, Akon and adult film star Kendra Lust. Per Variety, the SEC disclosed that charges were filed against these celebrities on Wednesday (March 22) in connection with the broader investigation of crypto entrepreneur Justin Sun and three of his companies: Tron Foundation Limited (Tronix [TRX]), BitTorrent Foundation Ltd. (BitTorrent [BTT]), and Rainberry Inc.
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The eight celebrities were charged with “illegally touting TRX and/or BTT without disclosing that they were compensated for doing so and the amount of their compensation,” according to the SEC. All but Mahone and Soulja Boy have reached settlements with the commission.
Celebrities Didn’t Disclose They Were Paid
“This case demonstrates again the high-risk investors face when crypto asset securities are offered and sold without proper disclosure,” SEC’s Gary Gensler said. “As alleged, Sun and his companies not only targeted U.S. investors in their unregistered offers and sales, generating millions in illegal proceeds at the expense of investors, but they also coordinated wash trading on an unregistered trading platform to create the misleading appearance of active trading in TRX. Sun further induced investors to purchase TRX and BTT by orchestrating a promotional campaign in which he and his celebrity promoters hid the fact that the celebrities were paid for their tweets.”
The SEC complaint accuses Sun of instructing the eight celebrities to not disclose that they were being paid to tout TRX and BTT assets on social media platforms. A representative for Lohan said she was unaware of any disclosure obligations. Despite that, the actress agreed to pay a fine to resolve it.
Sun, 32, is accused of taking numerous steps to manipulate the market for those currencies through “wash trading.” “Wash trading” is explained by the SEC as a process that “involves the simultaneous or near-simultaneous purchase and sale of a security to make it appear actively traded without an actual change in beneficial ownership.” From April 2018 to February 2019, Sun “allegedly directed his employees to engage in more than 600,000 wash trades of TRX between two crypto asset trading platform accounts he controlled,” according to the SEC. Sun also generated $31 million in proceeds through secondary market sales of illegal and unregistered sales of the token.
In connection with the charges against Sun, we also charged 8 celebrities for illegally touting Sun’s crypto asset securities.— U.S. Securities and Exchange Commission (@SECGov) March 22, 2023