Lindsay Lohan, Jake Paul and six other celebrities charged by the SEC in crypto fraud
On Wednesday, March 22nd, the Securities and Exchange Commission (the “SEC“) announced charges against eight celebrities in connection with a broader investigation of crypto entrepreneur Justin Sun and three of his companies: Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc., which marketed crypto asset securities under the brand names Tronix (TRX) and BitTorrent (BTT).
The SEC charged the following eight celebrities for illegally touting TRX and/or BTT without disclosing that they were compensated for doing so and the amount of their compensation.
- Actress Lindsay Lohan
- Youtuber Jake Paul
- Rapper DeAndre Cortez Way (aka Soulja Boy)
- Singer Austin Mahone
- Adult Film Star Michele Mason (aka Kendra Lust)
- Rapper Miles Parks McCollum (aka Lil Yachty)
- Singer Shaffer Smith (aka Ne-Yo)
- Singer Aliaune Thiam (aka Akon)
The SEC complaint, filed in U.S. District Court for the Southern District of New York, accuses Sun of instructing the eight celebrities to not disclose that they were being paid to tout TRX and BTT assets on social media platforms.
The SEC’s complaint further alleges that Sun and his companies offered and sold TRX and BTT as investments through multiple unregistered “bounty programs,” which directed interested parties to promote the tokens on social media, join and recruit others to Tron-affiliated Telegram and Discord channels, and create BitTorrent accounts in exchange for TRX and BTT distributions. The complaint further alleges that Sun, BitTorrent Foundation, and Rainberry offered and sold BTT in unregistered monthly airdrops to investors, including in the United States, who purchased and held TRX in Tron wallets or on participating crypto asset trading platforms. According to the complaint, each of these unregistered offers and sales violated Section 5 of the Securities Act.
The complaint also alleges that Sun violated the antifraud and market manipulation provisions of the federal securities laws by orchestrating a scheme to artificially inflate the apparent trading volume of TRX in the secondary market. According to the SEC, Sun took numerous steps to manipulate the market for those currencies through more than 600,000 wash trades of TRX between two crypto assets trading platform accounts he controlled, with between 4.5 million and 7.4 million TRX wash traded daily. As alleged, Sun also sold TRX into the secondary market, generating proceeds of $31 million from illegal, unregistered offers and sales of the token.
Soulja Boy and Mahone were not part of the settlement.
To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected]. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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Brenda Hamilton, Securities Attorney
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