US SEC sues Tron founder Justin Sun, Lindsay Lohan, other celebrities for promoting alleged crypto scam

The regulator also sues Justin Sun, whose company sold tokens TRX and BTT

March 23, 2023

Lindsay Lohan, Jake Paul, Ne-Yo, and more stars charged by SEC over cryptocurrency violations

The US Securities and Exchange Commission (US SEC) announced that they have filed fraud charges, as well as unregistered securities charges, against crypto founder Justin Sun — who is also a Grenadian diplomat along with eight celebrities — including actress Lindsay Lohan, boxer/ influencer Jake Paul, and rapper/ producer Soulja Boy — for perpetrating fraud via market manipulation and paying stars for crypto endorsements.

The Commission announced charges against Sun and three of his wholly-owned companies, Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc. (formerly BitTorrent), for the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT).

The SEC simultaneously charged celebrities for “illegally touting TRX and/ or BTT without disclosing that they were compensated for doing so and the amount of their compensation”.

The SEC’s complaint, filed in the US District Court for the Southern District of New York, alleged that Sun and his companies offered and sold TRX and BTT as investments through multiple unregistered “bounty programmes”.

These programmes directed interested parties to promote the tokens on social media, join and recruit others to Tron-affiliated Telegram and Discord channels, and create BitTorrent accounts in exchange for TRX and BTT distributions.

“This case demonstrates again the high-risk investors face when crypto asset securities are offered and sold without proper disclosure,” said SEC Chair Gary Gensler. “As alleged, Sun and his companies not only targeted 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,” Gensler said in a statement.

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.

The complaint further alleged that Sun, BitTorrent Foundation, and Rainberry offered and sold BTT in unregistered monthly airdrops to investors, including in the US, who purchased and held TRX in Tron wallets or on participating crypto asset trading platforms.

According to the complaint, these unregistered offers and sales violated Section 5 of the Securities Act.

Gurbir S Grewal, Director of the SEC’s Division of Enforcement, said that Sun and others used an old playbook to mislead and harm investors by “first offering securities without complying with registration and disclosure requirements and then manipulating the market for those very securities”.

Except Soulja Boy, Cortez Way, and singer Austin Mahone, the celebrities charged agreed to pay a total of more than $400,000 in interest and penalties to settle the charges, without admitting or denying the SEC’s findings

[With Inputs from IANS]

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