TThe US Securities and Exchange Commission sued crypto mogul Justin Sun for allegedly violating securities rules, saying eight celebrities including Lindsay Lohan and the artist known as Soulja Boy illegally designated tokens.
Lohan and Soulja Boy, whose real name is DeAndre Cortez Way, illegally promoted tokens — Tronix and/or BitTorrent — without disclosing compensation, the SEC alleged. Most of the celebrities agreed to pay a total of more than $400,000 to settle the charges, without admitting or denying the SEC’s findings, the agency said in a statement. The only two who didn’t were Soulja Boy and singer-songwriter Austin Mahone.
Lohan did not immediately respond to requests for comment by phone or email. The attorneys representing Cortez Way and Mahone declined to comment.
The lawsuit, filed Wednesday in New York federal court, alleges that Sun worked with companies he owns and controls — the Tron Foundation, the BitTorrent Foundation Ltd. and Rainberry Inc. – to engineer the offering and sale of the unregistered securities, including the Tronix and BitTorrent tokens. It also accuses the crypto entrepreneur of violating anti-fraud and market manipulation rules.
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“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,” said Gurbir Grewal, the director of the SEC’s enforcement division. a statement.
An early investor in Bitcoin, Sun has used his investments as well as the success of a social media app in China to launch Tron, a blockchain network currently used by thousands of gambling and gaming apps.
In the complaint, the SEC said Sun and his companies used “bounty programs” that directed users to complete certain tasks, such as social media campaigns, in exchange for tokens.
The agency also alleged that the crypto businessman carried out a fraudulent scheme to artificially inflate the trading volume of Tronix – the original crypto of the Tron network – in the secondary market, including by directing his employees – from at least April 2018 to February 2019 – to conduct more than 600,000 “wash trade” of TRX between two crypto accounts he controlled.
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“It makes sense that the SEC is investigating the practice of wash trading,” said Campbell Harvey, a finance professor at Duke University. “Market manipulation should not be allowed in any type of market. Again, there should be clear guidelines specific to the crypto space on what constitutes manipulation.”
The Sun and representatives for Rainberry did not immediately return requests for comment.
TRX, the token linked to the Tron network, fell around 12%. The price of BTT, a token associated with BitTorrent, fell by more than 1%.
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The total value locked in decentralized finance apps – which allow people to lend, borrow and trade – on the Tron blockchain fell by more than 3% in the past 24 hours, to around $5 billion, over the past 24 hours, according to tracker DeFi Lama.
— With the assistance of Olga Kharif.
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