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The US Securities and Exchange Commission has filed civil charges against eight celebrities, alleging they illegally promoted two cryptocurrencies without disclosing that they were paid to do so.
In a recent news release, the SEC unveiled charges against celebrities who promoted cryptocurrencies Tronix (TRX) and BitTorrent (BTT), which were sold by crypto entrepreneur Justin Sun.
The celebrities involved include actress Lindsay Lohan, internet personality Jake Paul, musician Soulja Boy, singer Austin Mahone, porn actress Kendra Lust, rapper Lil Yachty, musician Ne-Yo, and Senegalese-American singer Akon.
The group is accused of illegally promoting TRX and BTT crypto assets “without disclosing that they were compensated for doing so and the amount of their compensation”, the SEC said.
The agency also unveiled fraud and unregistered securities charges against Sun and three of his wholly-owned companies, Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc, for the sale of their TRX and BTT tokens.
The SEC also alleged that Sun and the companies paid celebrities with vast social media followings to hype TRX and BTT and directed them not to publicly disclose their compensation.
“This case demonstrates again the high-risk investors face when crypto asset securities are offered and sold without proper disclosure,” SEC chair Gary Gensler said in a statement. He added:
“As alleged, Sun and his companies not only targeted U.S. investors in their unregistered offers and sales, generating millions in illegal proceeds at the expense of investors, but they also coordinated wash trading on an unregistered trading platform to create the misleading appearance of active trading in TRX.”
Celebrities Paid Over $400,000 in Combined Penalties to Settle Charges
All of the celebrities involved in the scheme, apart from Soulja Boy and Mahone, have paid a combined total of more than $400,000 to settle the charges without admitting or denying the SEC’s findings.
Actress Lohan, best known for her role in the 2004 film Mean Girls, paid $10,000 to the SEC and another $30,000 in penalties.
Popular YouTuber and internet personality Paul was ordered to pay more than $100,000.
This is not the first time the SEC has charged celebrities for promoting cryptocurrencies.
Back in February, the agency charged former NBA player Paul Pierce with violating anti-fraud and anti-touting rules by promoting the EthereumMax cryptocurrency. Pierce has agreed to settle the charges and pay $1.409 million in penalties.
In October last year, the SEC also charged Kim Kardashian for touting the EMAX crypto asset on her Instagram feed. At the time, the reality TV superstar agreed to pay $1.26 million to settle the charges over the promotion of the token.
The SEC has gotten more aggressive with its enforcement action against crypto players.
After reaching an agreement with crypto exchange Kraken to stop offering staking services to clients in the country and pay $30 million, the agency has now sent a “Wells notice” to Coinbase, threatening the crypto exchange with legal actions regarding some of its listed digital assets, its staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet.
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