SEC sues Tron founder Justin Sun, Lindsay Lohan, other celebrities for crypto sales
NEW YORK, March 22 (Reuters) – The U.S. Securities and Exchange Commission charged Chinese cryptocurrency entrepreneur Justin Sun with fraud on Wednesday and accused eight celebrities, including actress Lindsay Lohan and rapper Soulja Boy, of illegally promoting crypto assets.
Sun and his companies Tron Foundation, BitTorrent Foundation and Rainberry were accused since August 2017 of planning to distribute billions of crypto assets known as Tronix (TRX) and BitTorrent (BTT) and artificially inflate trading volume.
He was also accused of concealing payments to celebrities to promote TRX and BTT on social media accounts, misleading the public into believing they had “vested interest in TRX and BTT, and were not just paid spokespersons.”
The SEC said Sun’s activity generated tens of millions of dollars in illegal profits at the expense of other investors.
“This case demonstrates once again the high risk investors face when cryptoasset securities are offered and sold without proper disclosure,” SEC Chairman Gary Gensler said in a statement.
Sun did not immediately respond to a request for comment via Twitter. An attorney for him could not be immediately identified.
The other celebrities charged include singers Akon, Austin Mahone and Ne-Yo, social media personality and boxer Jake Paul, rapper Lil Yachty and porn actress Kendra Lust.
All but Soulja Boy and Mahone agreed to settle, without admitting wrongdoing, and together paid more than $400,000.
Andrew Brettler, a lawyer for Lohan, said the actress did not know about the disclosure requirements until last March.
“From the beginning, she cooperated with the SEC’s investigation and ultimately agreed to withdraw the small amount she received and pay a fine to resolve this matter,” her attorney Andrew Brettler said in an emailed statement.
An attorney for Kendra Lust declined to comment. Attorneys for the other celebrities did not immediately respond to requests for comment.
The SEC has stepped up its efforts to crack down on the crypto industry, which Gensler has called a “Wild West” riddled with misconduct. Its efforts gained momentum after the November collapse of Sam Bankman-Fried’s cryptocurrency exchange FTX.
In its complaint filed in Manhattan federal court, the SEC said Sun was selling TRX and BTT as securities and that their sales had to be registered with the agency.
It said Sun apparently increased trading volume in TRX through extensive “wash trading”, which involved simultaneous or near-simultaneous buying and selling with no real change in ownership.
From at least April 2018 to February 2019, Sun ordered employees to execute hundreds of thousands of wash trades between two accounts he controlled, the SEC said.
By creating a false and misleading appearance of legitimate trading, Sun facilitated the sale of TRX while maintaining stable prices, and generated $31 million in revenue from illegal, unregistered offers and sales of TRX, the SEC said.
Reporting by Chris Prentice and Jonathan Stempel in New York; Editing by Lisa Shumaker and Lincoln Feast.
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