The Securities and Exchange Commission said Wednesday it had accused a handful of celebrities — including Internet provocateur-turned-professional boxer Jake Paul and actress Lindsay Lohan — of promoting cryptocurrencies without disclosing that they were being compensated to do so.
Lindsay Lohan, Jake Paul face SEC charges over crypto ads
The SEC also accused entrepreneur Justin Sun and three of his companies of “the unregistered offering and sale” of TRX and BTT.
The complaint, filed Wednesday in the US District Court for the Southern District of New York, also alleged that Sun “directed the manipulative wash trade of TRX to create an artificial appearance of legitimate investor interest and keep TRX’s price floating,” citing a scheme. where securities are essentially traded at the same time between affiliated entities, making the asset “appear to be actively traded without an actual change in beneficial ownership.”
Sun – a Chinese entrepreneur who became a citizen of Grenada, the small island nation in the West Indies that grants citizenship to those who make large investments in the country – gained worldwide attention in 2019 after he paid $4.6 million to have lunch with Warren Buffett, but then canceled it, apologizing for “excessive self-promotion.”
The celebrities’ promotional messages about the cryptocurrencies were posted on social media, according to the SEC. Lohan, who has more than 8 million Twitter followers, tweeted on February 11, 2021 that she “already liked” three of Sun’s cryptocurrencies, including TRX. “Super fast and 0 fee,” she wrote. “Good job @justinsuntron.”
In March 2021, she promoted an auction – in TRX – for an NFT, or non-fungible token, of one of her songs. “Just over 9 hours left to bid!” she tweeted 1 April 2021.
Paul and Lohan — along with rapper Lil Yachty (whose legal name is Miles Parks McCollum) — were among the six celebrities who agreed to pay a combined more than $400,000 to settle the charges without admitting wrongdoing; the six were not named in the complaint, as Mahone and Soulja Boy were.
Representatives for Lohan, Paul, Mahone, Soulja Boy and Lil Yachty did not respond to requests for comment. Tron and BitTorrent, which the SEC said are wholly owned by Sun, and the Foreign Affairs Ministry of Grenada, which appointed Sun as a World Trade Organization ambassador in 2021, did not respond to requests for comment.
The charges were not the first actions by the SEC against celebrities it alleged had illegally promoted cryptocurrencies. Kim Kardashian last year agreed to pay $1.26 million to settle SEC charges after she promoted EthereumMax (EMAX) on social media.
The SEC on Wednesday also issued a legal notice to Coinbase, according to the cryptocurrency platform. Coinbase said it had received a “Wells Notice,” a warning of upcoming charges. The SEC “told us that they have identified potential violations of securities law, but little more. We specifically asked the SEC to identify which assets on our platforms they believe may be securities, and they refused to do so,” wrote Coinbase’s chief legal officer, Paul Grewal , in a blog post. The SEC declined a request for comment.
The charges, if brought, would be the most significant regulatory action yet against Coinbase, which has positioned itself as a sort of responsible adult in the space as other crypto platforms — namely FTX — have collapsed.
