On Wednesday, the Securities and Exchange Commission announced they were charging eight celebrities, including actress Lindsay Lohan and influencer-turned-pugilist Jake Paul, with security law violations in connection to their social media promotion of several crypto companies, all owned by entrepreneur Justin Sun.
According to Variety, SEC chair Gary Gensler said, "Sun further induced investors to purchase TRX and BTT by orchestrating a promotional campaign in which he and his celebrity promoters hid the fact that the celebrities were paid for their tweets."
Other celebrities charged beyond Paul and Lohan were the musicians and rappers Ne-Yo, Lil Yachty, Souja Boy, Akon, and Austin Mahone. Porn star Kendra Lust was also charged.
The celebrity octet were charged with "illegally touting TRX and/or BTT without disclosing that they were compensated for doing so and the amount of their compensation."
Soula Boy (DeAndre Cortez Way) and Mahone are the only two who have not conceded to "more than $400,000 in disgorgement, interest, and penalties to settle the charges, without admitting or denying the SEC’s findings."
Sun was accused of telling the celebrities to keep quiet about their getting paid to promote his crypto according to court filings made by the SEC in New York’s Southern District federal court.
Sun has three companies under investigation BitTorrent Foundation Ltd., Tron Foundation Limited, and Rainberry Inc., which used the names BitTorrent (BTT) and Tronix (TRX) to market the crypto.
The celebrities were allegedly paid to promote TRX and BTT through their social media platforms.
"This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure. As alleged, 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 in TRX," said SEC chair Gensler.
Sun is accused of "wash trading" or a mechanism that "involves the simultaneous or near-simultaneous purchase and sale of a security to make it appear actively traded without an actual change in beneficial ownership."
Lohan spokeswoman Leslie Sloane said, "Lindsay was contacted in March 2022 and was unaware of the disclosure requirement. She agreed to pay a fine to resolve the matter."
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