The Securities and Exchange Commission has unveiled fraud and unregistered securities charges against crypto founder and Grenadian diplomat Justin Sun, alongside separate violations against the celebrity backers of his Tronix and BitTorrent crypto assets, which included Jake Paul, Lindsay Lohan and Soulja Boy.
The SEC alleged that Sun engaged in fraud by manipulating the trading activity of the two tokens, creating the appearance of active trading when it did not exist. The unregistered offer and sale charges, on the other hand, are similar to charges the SEC has unveiled against other crypto offerings and exchanges, including Genesis, Gemini and Do Kwon’s Terraform Labs.
“This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure,” said SEC Chair Gary Gensler.
Sun allegedly induced investors to purchase TRX and BTT tokens by “orchestrating a promotional campaign in which he and his celebrity promoters hid the fact that the celebrities were paid for their tweet,” Gensler said in a statement.
The eight celebrities and influencers were:
- actor Lindsay Lohan
- social-media personality Jake Paul
- musician DeAndre Cortez Way, also known as Soulja Boy
- musician Austin Mahone
- adult actress Michele Mason, known as Kendra Lust
- musician Miles Parks McCollum, known as Lil Yachty
- musician Shaffer Smith, also known as Ne-Yo
- musician Aliaune Thiam, also known as Akon
All except for Soulja Boy and Mahone agreed to pay a collective $400,000 in disgorgement, interest and penalties to settle the charges. The settlements were not an admittance or denial of guilt.
Those celebrity backers would promote the TRX and BTT tokens on social media and recruited others to Tron-affiliated Telegram and Discord channels.
Tron and his backers’ alleged behavior was part of an “age-old playbook to mislead and harm investors,” SEC enforcement chief Gurbir Grewal said in a statement.
“At the same time, Sun paid celebrities with millions of social media followers to tout the unregistered offerings, while specifically directing that they not disclose their compensation. This is the very conduct that the federal securities laws were designed to protect against regardless of the labels Sun and others used,” Grewal said.
A spokesperson for Lohan told NBC News on March 22 that the actor was “unaware of the disclosure requirement” until she was contacted by officials.
“She agreed to pay a fine to resolve the matter,” the spokesperson said.
Sun’s representative at Tron did not immediately return a request for comment. Jake Paul’s representatives declined to comment.
This story first appeared on CNBC.com.