The Securities and Exchange Commission has cracked down on the businesses of crypto entrepreneur Justin Sun and has charged him for the unregistered offer and sale of the tokens Tronix and BitTorrent. If those tokens sound familiar even to non-hardcore crypto enthusiasts, it’s because several celebrities had promoted them on social media — and now they’re also being charged by the agency. According to the SEC, eight celebrities, including Lindsay Lohan, Jake Paul, Soulja Boy, Ne-Yo and Akon, illegally promoted the tokens online without disclosing that they were paid to do so.
“…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,” Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said in a statement.
All celebrities charged, with the exception of Soulja Boy and musician Austin Mahone, have agreed to pay a collective amount of $400,000 in penalties to settle the charges. It’s not the first time the SEC went after celebrities shilling crypto on social media — it previously charged Kim Kardashian and NBA Hall of Famer Paul Pierce for posting about EthereumMax’s EMAX tokens without revealing that they had been paid for the promotion. Kardashian paid $1.26 million to settle the charges against her, while Pierce paid $1.4 million.
As for Sun himself, the SEC accused him of violating antifraud and market manipulation provisions of the federal securities laws. The agency said he offered the tokens as investments through unregistered bounty programs that prompted participants to promote the tokens on social media and to recruit others. In addition, the SEC also accused Sun of directing employees to artificially inflate the value of Tronix by simultaneously selling and purchasing the token to make it appear actively traded.
“As alleged in the complaint,” Grewal said, “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.”