Celebrities hawking cryptocurrencies were charged by the Securities and Exchange Commission with failing to disclose that they were being paid for doing so, according to the Securities and Exchange Commission.
The celebrities were named in connection with charges against crypto entrepreneur Justin Sun and three companies he owns -- Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc. (formerly BitTorrent). The charges involved the unregistered offer and sale of crypto securities, the SEC announced in a media release.
The SEC alleged that the celebrities were paid for endorsing crypto asset securities Tronix (TRX) and BitTorrent (BTT) while customers were not informed of the payments.
The eight are: actress Lindsay Lohan, boxer and YouTube personality Jake Paul, rapper DeAndre Cortez Way, who goes by the professional name of Soulja Boy, pop singer Austin Mahone, adult film star Michele Mason (who works professionally as Kendra Lust), rapper Miles Parks McCollum (whose professional name is Lil Yachty), singer-songwriter Shaffer Smith (known as Ne-Yo), and singer-songwriter Aliaune Thiam (who goes by Akon).
Cortez Way, Mccollum, Smith and Thiam have all been nominated for or won Grammy awards.
Lindsay Lohan, Jake Paul, Lil Yachty, Soulja Boy, Ne-Yo, Akon and Austin Mahone been hit with Securities and Exchange Commission charges for violating securities laws in touting crypto currencies.
— Pop Crave (@PopCrave) March 22, 2023
The SEC last year filed similar charges against celebrity-businesswoman Kim Kardashian, who paid $1.26 to settle the charges.
The SEC noted that except for Cortez Way and Mahone, the celebrities had agreed to pay fines of more than $400,000 to settle the charges.
“Although the celebrities were paid to promote TRX and BTT, their touts on social media did not disclose that they had been paid or the amounts of their payments. Thus, the public was misled into believing that these celebrities had unbiased interest in TRX and BTT, and were not merely paid spokespersons,” the SEC complaint stated.
“Additionally, Sun materially misrepresented the truth about the touting campaign to deceive investors. In February 2021, Sun stated falsely on social media, ‘If any celebrities are paid to promote TRON, we require them to disclose.’ In fact, Sun himself arranged the payments to celebrities and knew those payments were not disclosed,” the complaint stated.
The SEC charged that Sun engaged in what is called "wash trading," a scheme in which securities are traded among associated entities that artificially inflates the apparent volume of trading in a crypto asset.
“This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure,” SEC Chairman Gary Gensler said in the release.
Lindsay Lohan got paid $10,000 to illegally promote crypto coins to her 8.4 million followers.
Smells of desperation. pic.twitter.com/0g02VHZIGM
— Genevieve Roch-Decter, CFA (@GRDecter) March 22, 2023
“As alleged in the complaint, Sun and others used an age-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,” Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said in the release.
“At the same time, Sun paid celebrities with millions of social media followers to tout the unregistered offerings, while specifically directing that they not disclose their compensation. This is the very conduct that the federal securities laws were designed to protect against, regardless of the labels Sun and others used,” he said.
As an indication of further efforts by the SEC to intervene in the crypto market, the agency on Wednesday gave Coinbase, a cryptocurrency platform, notice that charges against it will be forthcoming, according to The Washington Post.
The SEC “told us they have identified potential violations of securities law, but little more. We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so,” Coinbase’s chief legal officer, Paul Grewal, wrote on Coinbase’s website.
This article appeared originally on The Western Journal.