Last Updated on March 23, 2023 by Bitfinsider
The SEC charged Chinese cryptocurrency entrepreneur Justin Sun with fraud on Wednesday, accusing eight celebs, including actress Lindsay Lohan and musician Soulja Boy, of unlawfully marketing his crypto assets.
Sun and his businesses Tron Foundation, BitTorrent Foundation, and Rainberry have been accused of conspiring to disperse billions of Tronix (TRX) and BitTorrent (BTT) crypto assets and artificially inflate trading activity since August 2017.
He was also accused of hiding payments made to celebs to promote TRX and BTT on social media accounts, leading the public to believe they had a “unbiased interest in TRX and BTT and were not simply paid spokespersons.”
According to the SEC, Sun’s actions resulted in tens of millions of dollars in unlawful profit at the cost of other stockholders.
“This case highlights the elevated risk investors confront when crypto asset instruments are offered and sold without appropriate disclosure,” said SEC Chair Gary Gensler in a statement.
Sun did not quickly reply to a Twitter comment request. A counsel for him could not be found right away.
Akon, Austin Mahone, and Ne-Yo were among the other celebs accused, as were social media figure and boxer Jake Paul, artist Lil Yachty, and porn actress Kendra Lust.
Except for Soulja Boy and Mahone, all decided to resolve without acknowledging wrongdoing and paid a total of more than $400,000.
According to Lohan’s counsel, Andrew Brettler, the starlet was unaware of the disclosure obligations until last March.
“She complied with the SEC’s inquiry from the beginning and eventually decided to relinquish the tiny sum of money she got and pay a fee to settle this issue,” her attorney Andrew Brettler said in an emailed statement.
Kendra Lust’s lawyer refused to respond. The lawyers for the other celebrities did not quickly reply to queries for comment.
The SEC has increased its efforts to clamp down on the crypto sector, which Gensler has described as a “Wild West” riddled with fraud. Its attempts accelerated following the November failure of Sam Bankman-bitcoin Fried’s exchange FTX.
The SEC claimed in a lawsuit submitted in federal court in Manhattan that Sun sold TRX and BTT as securities, which required registration with the agency.
Sun was accused of inflating TRX apparent trading volume through widespread “wash trading,” which involved simultaneous or near-simultaneous buying and sells with no actual shift in ownership.
Sun directed workers to perform hundreds of thousands of wash transactions between two accounts he controlled from at least April 2018 to February 2019, according to the SEC.
Sun made it simpler to sell TRX while keeping steady values by creating a deceptive and deceiving image of legitimate trading, according to the SEC, and produced $31 million in profits from illegal, unreported TRX offers and sales.
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