Lindsay Lohan, Jake Paul, and Soulja Boy are facing legal action from the US’ Securities and Exchange Commission (SEC) over their promotion of cryptocurrency assets.
The trio are part of a real rogues’ gallery of celebrities also facing a court date, including Austin Mahone, pornstar Kendra Lust (real name Michele Mason), rapper Lil Yachty, Ne-Yo, and Akon.
The group have all been caught up in legal action taken against crypto entrepreneur Justin Sun and three of his wholly-owned companies, Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc. (formerly BitTorrent), for the unregistered offer and sale of the Tronix (TRX) and BitTorrent (BTT) cryptocurrencies.
The group of celebs is being charged by the SEC of illegally touting TRX and/or BTT without disclosing that they were compensated for doing so and the amount of their compensation.
The SEC also alleges that Sun and his companies offered and sold TRX and BTT as investments through multiple unregistered “bounty programs,” which directed the celebs to spruik the currencies on social media, as well as recruiting others to Tron-affiliated Telegram and Discord channels and create BitTorrent accounts in exchange for TRX and BTT distributions.
“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.
“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.”
“While we’re neutral about the technologies at issue, we’re anything but neutral when it comes to investor protection,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
“As alleged in the complaint, Sun and others used an age-old playbook to mislead and harm investors by first offering securities without complying with registration and disclosure requirements and then manipulating the market for those very securities. 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.”
All of the celebs, save for Soulja Boy and Mahone, have agreed to pay more than $400,000 in disgorgement, interest, and penalties to settle the charges, without admitting or denying the SEC’s findings.