The US Securities and Exchange Commission (SEC) has charged eight celebrities, including actress Lindsay Lohan and YouTuber Jake Paul, for illegally promoting two cryptocurrencies on social media without disclosing their compensation.
The two cryptocurrencies, Tronix (TRX) and BitTorrent (BTT), were sold by crypto entrepreneur Justin Sun, who was also charged by the SEC for fraud and market manipulation. This case highlights the risks involved in investing in crypto assets that are not registered or regulated by the authorities.
According to the SEC’s press release, Sun and his companies paid Lohan, Paul, and six other celebrities – Soulja Boy, Austin Mahone, Kendra Lust, Lil Yachty, Ne-Yo, and Akon – to promote TRX and BTT on Twitter and Instagram between December 2020 and March 2021.
The celebrities did not disclose that they received payments ranging from $5,000 to $50,000 for their posts. The SEC alleges that Sun and his companies violated securities laws by offering and selling unregistered crypto asset securities and engaging in wash trading to create a false impression of active trading.
The SEC has ordered Sun and his companies to pay more than $18 million in disgorgement of ill-gotten gains plus interest and penalties.
Six celebrities agreed to settle the charges without admitting or denying the findings. They have paid more than $400,000 in disgorgement plus interest and penalties. The charges against Soulja Boy and Mahone are still pending.
The SEC’s chair Gary Gensler said: “This case demonstrates again the high-risk investors face when crypto asset securities are offered and sold without proper disclosure.”
He added: “Sun and his companies not only targeted US 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.”
The SEC advises investors to be cautious when considering investing in crypto assets promoted by celebrities or influencers who may not have sufficient knowledge or expertise. Investors should also do their own research before making any investment decisions.
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