SEC charges Tron founder Justin Sun, Linsday Lohan, Jake Paul, and other celebrities with crypto fraud
The founder of the Tronix and BitTorrent crypto assets, Justin Sun, who is also a Grenadian diplomat, has been charged by the Securities and Exchange Commission (SEC) for fraud and offering unregistered securities. In addition, the SEC also charged celebrities and influencers including Jake Paul, Lindsay Lohan, and Soulja Boy, for crypto fraud and securities violations.
According to the SEC, Justin Sun is accused of fraudulent activity by manipulating the trading activity of Tronix and BitTorrent tokens to create a false impression of active trading. In addition, Sun is facing charges for offering and selling unregistered securities, a charge that has also been brought against other crypto exchanges and offerings such as 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:
- actress 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.
“On February 11, 2021, Lohan—a well-known actress, singer, and internet personality—touted on social media a crypto asset security that was being offered and sold. Lohan did not disclose that she was being paid to give publicity to such security by the entity offering and selling it to the public. Lohan’s failure to disclose this compensation violated Section 17(b) of the Securities Act, which makes it unlawful for any person to promote security without fully disclosing the receipt and amount of such compensation from an issuer,” SEC wrote.
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.
According to the charges, SEC said: “From August 2017 to the present, Tron and Sun have engaged in the continuous public offer and sale of TRX tokens. Based on Tron’s and Sun’s offering materials and public statements, purchasers of TRX tokens would have had a reasonable expectation of profits from their investment in the tokens. Tron and Sun explicitly promoted TRX as an investment and touted the potential for significant returns to investors through buying, holding, and trading TRX tokens. Tron and Sun worked to list TRX on numerous crypto asset trading platforms, including within the United States, and publicly encouraged investors to purchase TRX through the new venues. Tron and Sun routinely touted the market capitalization, price, and trading volume of TRX, and published articles advising followers of purportedly opportunistic times to “invest” in TRX,”
“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.
Sun’s representative at Tron did not immediately return a request for comment.33-11173