The Securities and Exchange Commission has charged eight celebrities - including actress Lindsay Lohan and YouTube star Jake Paul - for illegaly touting crypto asset tokens without disclosing that they were paid for doing so.
Other celebrities caught up in the promotional campaign for Tronix and BitTorrent tokens include:
- DeAndre Cortez Way (Soulja Boy)
- Austin Mahone
- Michele Mason (Kendra Lust)
- Miles Parks McCollum (Lil Yachty)
- Shaffer Smith (Ne-Yo)
- Aliaune Thiam (Akon)
With the exception of Cortez Way and Mahone, the celebrities charged agreed to pay a total of more than $400,000 in disgorgement, interest, and penalties to settle the charges, without admitting or denying the SEC’s findings.
The US watchdog has also charged crypto asset entrepreneur Justin Sun for the unregistered offer and sale of the tokens and for fraudulently manipulating the secondary market for TRX through extensive wash trading. This 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.
Sun, a protégé of Alibaba founder Jack Ma, is known for having once paid $4.6 million to have dinner with investor Warren Buffett.
From at least April 2018 through 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, with between 4.5 million and 7.4 million TRX wash traded daily. This scheme required a significant supply of TRX, which Sun allegedly provided. As alleged, Sun also sold TRX into the secondary market, generating proceeds of $31 million from illegal, unregistered offers and sales of the token.
Gurbir Grewal, director of the SEC’s division of enforcement, says: “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.”
The SEC's determination to crack down on celebrity endorsements of crypto assets was first signalled when it slapped Kim Kardashian with a $1.26 million penalty for touting Emax tokens on her instagram account without dicslosing that she had been paid $250,000 for doing so.