The Securities and Exchange Commission (SEC) has charged eight celebrities, including actor Lindsay Lohan, influencer Jake Paul, and rapper Soulja Boy, with illegally promoting two cryptocurrencies without disclosing they were paid to do so.
The two cryptocurrencies, Tronix (TRX) and BitTorrent (BTT), were sold by crypto entrepreneur Justin Sun, who was also charged with the unregistered offer and sale of crypto asset securities and manipulating the secondary market through “wash trading.”
Sun and his companies are accused of paying celebrities with large social media followings to hype TRX and BTT while directing them not to publicly disclose their compensation.
Other celebrities charged include; Austin Mahone, Michele Mason (known as Kendra Lust), Miles Parks McCollum (known as Lil Yachty), Shaffer Smith (known as Ne-Yo), Aliaune Thiam (known as Akon).
The SEC alleges that the celebrities illegally touted one or both of the securities. Six of the celebrities have agreed to pay a total of more than $400,000 to settle the charges without admitting or denying the SEC’s findings. The other two, Soulja Boy and Austin Mahone, have not yet settled.
The rise of cryptocurrencies’ popularity has led to a wave of celebrity endorsements, but regulators are cracking down on illegal behavior in the crypto market. In October, the SEC charged Kim Kardashian with using her Instagram account to promote a cryptocurrency without divulging that she was being paid to promote it.
This case highlights the high-risk investors face when crypto asset securities are offered and sold without proper disclosure.
The SEC’s chair, Gary Gensler, stated, “This case demonstrates again the high-risk investors face when crypto asset securities are offered and sold without proper disclosure.”
The SEC’s action against Sun and the celebrities is part of a broader crackdown on the crypto industry. The SEC recently announced that it would be stepping up its efforts to police the cryptocurrency market, with a focus on issues like market manipulation, fraud, and other illicit activities.
The SEC’s enforcement actions against Sun and the celebrities are a reminder to investors to be cautious when investing in the cryptocurrency market and to be aware of the risks involved.