The Securities and Exchange Commission (SEC) today charged eight celebrities including Lindsay Lohan and Jake Paul with ‘illegally touting’ crypto currencies.
As well as Lohan and Paul, the regulator said rappers Soulja Boy and Lil Yachty, singers Akon, Ne-Yo and Austin Mahone, and pornstar Kendra Lust, promoted the assets without disclosing they were being compensated.
The eight are charged alongside Chinese crypto baron Justin Sun who, as well as paying the stars, allegedly artificially inflated the price of the coins they were touting through a fraudulent practice known as ‘trade washing.’
The SEC complaint filed in the Manhattan federal court alleges that Sun and his companies offered and sold cryptos through multiple unregistered ‘bounty programs,’ where the celebrities promoted the coins through social media.
With the exception of Soulja Boy and Mahone, the celebrities agreed to pay a total of more than $400,000 to settle the charges, without admitting or denying the SEC’s findings.
The Securities and Exchange Commission (SEC) today charged eight celebrities including Lindsay Lohan and Jake Paul with ‘illegally touting’ crypto currencies
The SEC also charged pornstar Kendra Lust and singer Akon
Chinese cryptocurrency entrepreneur Justin Sun speaks at a financial forum in Beijing, China November 4, 2015
Beginning around August 2017, Sun and his companies Tron Foundation Limited, BitTorrent Foundation Limited and Rainberry Inc engaged in a scheme to distribute billions of crypto assets known as Tronix (TRX) and BitTorrent (BTT), the SEC said.
That included the use of ‘bounty programs’ directing interested parties to promote the currencies on social media, including to US-based investors, the SEC said.
According to a settlement order, Lohan was paid $10,000 to post a tweet that said: ‘Exploring #DeFi and already liking $JST, $SUN on $TRX. Super fast and 0 fee. Good job @justinsuntron.’
The 36-year-old actress, who has more than 8.4 million Twitter followers, must pay $10,000 to the SEC and pay a civil monetary penalty of $30,000.
Paul, 26, a YouTuber turned boxer, netted $25,019 for promoting TRX in a tweet posted in February 2021, the SEC said.
Sun’s company, Tron Foundation Limited, paid Paul in crypto. Under his settlement, Paul must give up money he earned and was additionally fined $75,057.
TRX and BTT were sold as securities, and thus their sale needed to be registered with the SEC, the regulator said in its complaint filed in Manhattan federal court.
Sun, who was named Grenada’s ambassador to the World Trade Organization (WTO) last year, also violated laws against fraud and market manipulation by orchestrating a scheme to inflate apparent trading volume in TRX in the secondary market through wash trading, the SEC said.
This involves the simultaneous or near-simultaneous buying and selling of an asset to make it appear actively traded.
From at least April 2018 to February 2019, he allegedly directed employees to engage in over 600,000 wash trades of TRX between two accounts he controlled.
This garnered proceeds of $31 million from illegal, unregistered offers and sales of the tokens, the SEC said.
SEC Chair Gary Gensler said in a statement: ‘This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure
Singers Ne-Yo and Austin Mahone were also charged in the scheme alongside Sun
Soulja Boy and Lil Yachty
‘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.’
Lawyers for the celebrities and Rainberry did not respond immediately to requests for comment. A lawyer for Sun could not immediately be identified.
The SEC has previously brought enforcement actions against celebrities including Kim Kardashian, DJ Khaled, Steven Seagal and boxer Floyd Mayweather over promotion of cryptocurrency.
The agency says that the digital tokens touted by these high-profile influences are are securities, and are therefore regulated by the SEC.
Under US law, people who promote securities to prospective buyers must make public if they are being paid for doing so.
The regulation was originally designed to protect investors from newspaper articles which touted stocks without disclosing that the writer was being compensated.
But the SEC has used the law to crackdown on viral crypto promotional campaigns which have proliferated across social media sites like Twitter, Instagram and Facebook.
Read more at DailyMail.co.uk