The US Securities and Exchange Commission (SEC) has charged Justin Sun, the founder of cryptocurrency Tron, for the unregistered offer and sale of Tronix and BitTorrent tokens. The SEC has also charged eight celebrities, including Lindsay Lohan, Jake Paul, and Akon, for illegally promoting the tokens on social media without disclosing that they had been paid to do so. According to the SEC, Sun paid celebrities with millions of social media followers to promote the tokens without disclosing their compensation.
Celebrities agree to pay penalties
All celebrities charged, except for Soulja Boy and Austin Mahone, have agreed to pay a total of $400,000 in penalties to settle the charges. This is not the first time the SEC has targeted celebrities promoting crypto on social media. Previously, the agency charged Kim Kardashian and NBA Hall of Famer Paul Pierce for promoting EthereumMax’s EMAX tokens without revealing their compensation. Kardashian paid $1.26 million to settle the charges, while Pierce paid $1.4 million.
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Antifraud and market manipulation provisions
The SEC accused Sun of violating antifraud and market manipulation provisions of the federal securities laws. The agency stated that Sun offered the tokens as investments through unregistered bounty programs that prompted participants to promote the tokens on social media and to recruit others. Additionally, the SEC accused Sun of directing employees to artificially inflate the value of Tronix by simultaneously selling and purchasing the token to make it appear actively traded.
In a statement, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, warned against misleading investors by offering securities without complying with registration and disclosure requirements and then manipulating the market for those very securities. The SEC’s crackdown on Sun and the celebrities is part of its efforts to regulate the cryptocurrency industry and protect investors from fraudulent activities.
