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The US Securities and Exchange Commission [SEC] charged Chinese cryptocurrency entrepreneur Justin Sun with fraud on Wednesday. Actor Lindsay Lohan, rapper Akon, Soulja Boy and several other celebrities also charged in the scheme for illegally promoting Sun's crypto assets.
The 'Wild West' of misconduct
Sun and his companies Tron Foundation, BitTorrent Foundation and Rainberry were accused of scheming to distribute billions of crypto assets known as Tronix [TRX] and BitTorrent [BTT] without registering with the relevant authorities.
Sun was also charged with artificially inflating the trade volume. The celebrities were charged with concealing the fact that they were paid to promote TRX and BTT on their social media accounts as well as misleading the public into thinking they had an ''unbiased interest'' in the currency.
'' As alleged in the complaint, Sun and others used an age-old playbook to mislead and harm investors by first offering securities without complying with registration and disclosure requirements and manipulating the market for those very securities,'' The Hollywood Reporter quoted Gurbir S Grewal, director of the SEC's Division of Enforcement, as saying.
'' At the same time, Sun paid celebrities with millions of social media followers to tout the unregistered offerings, while specifically directing that they do not disclose their compensation.
This is the very conduct that the federal securities laws were designed to protect against regardless of the labels Sun and others used,'' he added.
The SEC said in their complaint that Sun's activities led to tens of millions of dollars of illegal profit at the expense of other investors.
Chair Gary Gensler said in a statement that the case ''demonstrates again the high-risk investors face when crypto asset securities are offered and sold without proper disclosure,'' reported DW.
After the collapse of Sam Bankman-Fried's cryptocurrency exchange FTX in November, the SEC has been ratcheting up their efforts to crack down on the crypto industry. Gensler described the crypto ecosystem as the ''Wild West'' riddled with misconduct.
Celebrities and cryptocurrencies
Some of the celebrities like Lindsay Lohan, Akon, adult film maker Michele
Mason, recording artists Ne-Yo and Lil Yachty and boxer Jake Paul agreed to
pay more that $ 400,000 [ Euro 367, 100] combined, to settle the claims.
Lohan's lawyer, Andre Brettler said that the actor was unaware about the disclosure requirements until last March.Lohan was asked to give up the $10,000 that she was paid, with interest. She was also charged a fine of $30,000.
In recent years, many celebrities like Reese Witherspoon, Matt Damon, Tom Brady and others have used their massive social media influence to promote cryptocurrencies. However, it is illegal to do so without the full disclosure of being paid to promote.
Last year, Reality TV star Kim Kardashian had to pay a fine of $1 million to settle federal charges after she recommended Ethereum Max tokens, a crypto security, to her millions of Instagram followers.
She did not disclose that she had been paid to promote the currency.In 2020, actor Steven Seagal paid more than $300,000 as part of a settlement with the SEC.
He was banned from promoting investments for three years. [DW]
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