A group of eight celebrities, including Lindsay Lohan and Jake Paul, have been charged by the US Securities and Exchange Commission (SEC) with promoting two crypto tokens without
disclosing that they were paid to do so. The stars are 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 also accused Justin Sun, a crypto investor and diplomat for Grenada, of fraud by manipulating the trading activity of the two tokens to make it appear as if they were actively being traded. Sun is known for having once paid $4.6m to have dinner with investor Warren Buffett.
According to the SEC, Sun orchestrated a promotional campaign in which he and his celebrity promoters hid the fact that the celebrities were paid for their tweets. Sun's companies, Tron Foundation Limited, BitTorrent Foundation Ltd and Rainberry Inc, are also charged as part of the scheme. The SEC said the celebrities, except for Soulja Boy and Austin Mahone, have paid a combined total of more than $400,000 to settle the charges.
Lohan, who is best known for her role in the 2004 film Mean Girls, had 8.4 million Twitter followers when she posted a message calling for her followers to invest. The 36-year-old actress, who charging documents say is a resident of Dubai in the United Arab Emirates, paid $10,000 to the SEC and another $30,000 in penalties. Paul, a YouTuber, boxer, and resident of Puerto Rico, was ordered to pay more than $100,000.
SEC 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 charges against the celebrities and Sun highlight the risks associated with investing in cryptocurrencies and the need for proper disclosure by those who promote them. The SEC has been cracking down on illegal crypto schemes in recent years, as the popularity of digital assets has grown. Investors should be wary of celebrity endorsements and seek out reliable sources of information before investing in any cryptocurrency. Photo by AntanaCoins, Wikimedia commons.