Lindsay Lohan, Lil Yachty, Jake Paul Among Celebrities Hit by SEC Charges for Reporting Crypto
Lindsay Lohan, Jake Paul, Ne-Yo and rapper Lil Yachty are among the eight notable names who have been hit with Securities and Exchange Commission charges for violating securities laws when touting cryptocurrencies.
The SEC revealed on Wednesday that charges were filed against eight celebrities in connection with the broader investigation into 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).
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The eight names in bold were charged with “unlawfully calling TRX and/or BTT without disclosing that they were compensated for doing so and the amount of their compensation,” according to the SEC.
The list also includes rapper Soulja Boy, singers Austin Mahone and Akon and adult film star Kendra Lust. All but Mahone and Soulja Boy (aka DeAndre Cortez Way) have reached settlements with the SEC involving “more than $400,000 in disgorgement, interest and penalties to settle the charges, without admitting or denying the SEC’s findings,” according to the SEC.
“This case demonstrates once again the high risk investors face when securities in cryptoassets are offered and sold without proper disclosure,” SEC Chairman Gary Gensler said. “As alleged, Sun and his companies not only targeted American investors in their unregistered offers and sales, generating millions in illegal income at the expense of investors, but they also coordinated wash trading on an unregistered trading platform to create the misleading appearance of active trading. i TRX. Sun induced additional investors to buy TRX and BTT by orchestrating an advertising campaign in which he and his celebrity promoters concealed the fact that the celebrities were being paid for their tweets.”
The SEC complaint, filed in New York’s Southern District federal court, accuses Sun of instructing the eight celebrities not to disclose that they were paid to display TRX and BTT assets on social media platforms.
A rep for Lohan said the actor was unaware of any duty of disclosure.
“Lindsay was contacted in March 2022 and was unaware of the disclosure requirement. She agreed to pay a fine to settle the case, spokeswoman Leslie Sloane said.
Sun is accused of taking a series of steps to manipulate the market for these currencies through “wash trading,” which is explained by the SEC as a process that “involves the simultaneous or near-simultaneous buying and selling of a security to make it appear active traded. without an actual change in beneficial ownership.” From April 2018 to February 2019, Sun engaged “allegedly directed his employees to engage in more than 600,000 wash trades of TRX between two crypto-asset trading platform accounts he controlled,” according to the SEC. Sun also generated $31 million in revenue through secondary market sales of illegal and unregistered sales of the token, per the SEC.
“While we are neutral on the technologies at issue, we are anything but neutral when it comes to investor protection,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement. “As alleged in the complaint, Sun and others used an ancient 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 showcase the off-the-record offers, while specifically asking that they not disclose the compensation. This is the very conduct that the federal securities laws were designed to protect against regardless of the labels Sun and others used.”
(Pictured: Lindsay Lohan, Jake Paul and Lil Yachty)
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