The Securities and Exchange Commission (SEC) today charged eight celebrities including Lindsay Lohan and Jake Paul with ‘illegally promoting’ cryptocurrency.
In addition to Lohan and Paul, the organizer said that rappers Soulja Boy and Lil Yachty, singers Akon, Ne-Yo and Austin Mahone, and porn star Kendra Lust promoted the assets without disclosing their compensation.
The eight have been charged along with Chinese cryptocurrency baron Justin Sun who, in addition to paying the stars, allegedly inflated the price of the coins they were promoting through a fraudulent practice known as ‘trade laundering’.
The SEC complaint filed in Manhattan federal court alleges that Sun and his companies offered and sold cryptocurrency through multiple unregistered “reward programs,” in which celebrities touted the coins via 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 ‘illegal’ cryptocurrency.
The US Securities and Exchange Commission also charged porn star Kendra Lust and singer Akon
Chinese cryptocurrency entrepreneur Justin Sun speaks at a financial forum in Beijing, China, November 4, 2015
As of August 2017, Sun and his companies Tron Foundation Limited, BitTorrent Foundation Limited, and Rainberry Inc were engaged in a scheme to distribute billions of crypto assets known as Tronix (TRX) and BitTorrent (BTT), the SEC said.
The SEC said this includes the use of “reward programs” that direct interested parties to promote the cryptocurrency on social media, including to US-based investors.
TRX and BTT were sold as securities, and therefore their sale must be registered with the Securities and Exchange Commission, the regulator said in its complaint filed in Manhattan federal court.
The SEC said Sun, who was named Grenada’s ambassador to the World Trade Organization last year, also violated anti-fraud and market manipulation laws by orchestrating a scheme to inflate the apparent trading volume of TRX in the secondary market through wash trading.
This involves the simultaneous or near-simultaneous buying and selling of an asset to make it appear to be actively trading.
From at least April 2018 to February 2019, he allegedly directed employees to participate in more than 600,000 TRX laundering transactions between two accounts he controlled.
The SEC said this generated $31 million in proceeds from illegal, unregistered token offerings and sales.
“This case demonstrates once again the high stakes investors face when crypto-asset securities are offered and sold without proper disclosure,” SEC Chairman Gary Gensler said in a statement.
Allegedly, Sun and his companies not only targeted US investors with their unregistered offerings and sales, generating millions in illegal proceeds at the expense of investors, but also orchestrated the wash trading on an unregistered trading platform to create the misleading appearance of active trading. in TRX.
Sun also urged investors to buy TRX and BTT by running a promotional campaign in which he and the famous promoters hid the fact that the celebrities got their tweets.
Attorneys for the celebrities and Rainberry did not immediately respond to requests for comment. A lawyer for Sun could not immediately be identified.
The SEC has previously taken enforcement action against celebrities including Kim Kardashian, DJ Khaled, Steven Seagal and boxer Floyd Mayweather for promoting cryptocurrency.
Singers Ne-Yo and Austin Mahone were also accused in the scheme, along with Sun
Soulja Boy and Lil Yachty
The agency says that the digital tokens promoted by these high-profile influencers are securities and are therefore regulated by the SEC.
Under US law, people who promote securities to potential buyers must announce if they are being paid to do so.
The regulation was originally put in place to protect investors from newspaper articles promoting stocks without disclosing the writer’s compensation.
But the SEC used the law to crack down on cryptocurrency promotional campaigns that spread across social media sites like Twitter, Instagram, and Facebook.
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