Jake Paul, Ne-Yo and Akon are among the A-listers named — and in total, they have agreed to pay $400,000 in penalties to settle the charges without admitting or denying the findings.
Listen to the CoinMarketRecap podcast on Apple Podcasts, Spotify and Google Podcasts
Tron founder Justin Sun — and eight celebrities — are now facing charges from the U.S. Securities and Exchange Commission.
The charges related to the unregistered offer and sale of Tronix and BitTorrent, amid allegations that secondary markets for TRX were manipulated through "extensive wash trading."
Several stars have also been accused of illegally touting TRX or BTT without disclosing that they were being compensated to do so.
Lindsay Lohan, Jake Paul, Ne-Yo and Akon are among the A-listers named — and in total, they have agreed to pay $400,000 in penalties to settle the charges without admitting or denying the findings.
The SEC has taken particular issue with how Sun's companies offered "bounty programs" that encouraged investors to promote both tokens on social media, and recruit new consumers to dedicated platforms on Telegram and Discord.
And between April 2018 and February 2019, it's claimed that Sun directed his employees to engage in over 600,000 wash trades of TRX, with the entrepreneur providing a "significant supply" of this altcoin.
In a statement, SEC chair Gary Gensler said:
"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 U.S. 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. 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 SEC has been accused of failing to offer a clear rule book for crypto companies in the U.S. — and engaging by regulation through enforcement. But Gurbir Grewal, the director of the SEC's division of enforcement, appeared to suggest this was not the case.
"While we're neutral about the technologies at issue, we're anything but neutral when it comes to investor protection."
Grewal went on to claim that an "age-old playbook" had been used to mislead and harm investors — and the A-listers he hired were specifically directed not to disclose the compensation they had received.
In Lohan's case, she was paid $10,000 to promote a cryptoasset in February 2021 — and officials allege she had 8.4 million followers on Twitter at the time. The post in question said:
"Exploring DeFi and already liking $JST, $SUN on $TRX. Super fast and 0 fee. Good job @justinsuntron"
It's alleged that Tron had used an intermediary to arrange the promotion, and had given Lohan the specific language that should be used in the post. As you can see, the lack of an #ad hashtag means it would have been difficult for followers to realize it was a promotion.
Lohan has agreed that she won't engage in paid promotions of cryptocurrencies on social media for the next three years.
Her specific settlement involves disgorgement of $10,000, interest of $670 and a civil money penalty of $30,000 — with payment made in three installments.
Other A-listers who have faced action from the SEC in the past, such as Kim Kardashian for promoting Ethereum Max, have agreed to similar conditions.