Lindsay Lohan and Jake Paul among crypto endorsers charged by SEC
The Securities and Exchange Commission on Wednesday announced charges against a prominent cryptocurrency entrepreneur and a group of celebrities who promoted his businesses, including actress Lindsay Lohan.
The SEC has filed a lawsuit in federal court in the Southern District of New York accusing the entrepreneur, Justin Sun, of securities law violations related to his management of three crypto companies. The agency also charged eight celebrities, including Ms Lohan and social media influencer Jake Paul, with illegally promoting Mr Sun’s cryptocurrencies.
Ms. Lohan, Mr. Paul and four of the other celebrities have agreed to pay a total of $400,000 to settle the charges.
The SEC charges are the latest in a series of federal enforcement efforts targeting the crypto industry, which has come under increasing scrutiny over the nearly 10 years. five months since the implosion of FTX, the exchange founded by Sam Bankman-Fried.
So far this year, the SEC has imposed fines and penalties on crypto lending companies and settled a case with Kraken, one of the largest US crypto exchanges. At the same time, federal banking regulators have expressed growing skepticism about crypto, increasing pressure on an industry in freewheeling after a succession of bankruptcies and market meltdowns over the past year.
On Wednesday, crypto exchange Coinbase announced that it had received a so-called Wells notice from the SEC, warning that the agency planned to take legal action against the company.
“We are confident in the legality of our assets and services, and if necessary, we welcome legal proceedings to provide the clarity we advocate,” the company said in a statement.
A longtime crypto investor, Mr. Sun, 32, has recently tried to portray himself as something of a crypto diplomat, working to encourage the adoption of digital assets across the world. He was Grenada’s representative to the World Trade Organization, and he calls himself “His Excellency” on social media.
But according to the SEC’s complaint, his companies — Tron Foundation, BitTorrent Foundation, and Rainberry — were offering cryptocurrencies that weren’t properly registered. Mr. Sun also engaged in manipulative business practices that created the artificial appearance that his digital currencies were attracting strong investor interest, according to the complaint.
A representative for Mr. Sun did not immediately respond to a request for comment.
According to the SEC, Mr Sun sparked interest in his crypto ventures – which included digital coins TRX and BTT – by recruiting celebrity endorsers.
“Although the celebrities were paid to promote TRX and BTT, their social media touts did not disclose that they were paid or the amount of their payments,” the complaint states. “The public has been misled into believing that these celebrities have an unbiased interest in TRX and BTT, and are not merely paid spokespersons.”
In February 2021, Ms. Lohan promoted TRX on Twitter in exchange for a payment of $10,000, the SEC said. “Super fast and free,” she wrote. “Good job @justinsuntron.” Through an intermediary, Tron had provided Ms. Lohan with the language of the tweet, according to the SEC
In addition to her and Mr. Paul, the SEC charged DeAndre Cortez Way, the rapper better known as Soulja Boy; Austin Mahone, singer and songwriter; Michele Anne Mason, director and internet personality known as Kendra Lust; Miles Parks McCollum, the rapper known as Lil Yachty; Shaffer Smith, an artist who goes by Ne-Yo; and Aliaune Thiam, an artist known as Akon. All but Mr. Way and Mr. Mahone have settled their charges.
Under federal law, individuals who endorse titles are required to disclose whether they received compensation for the promotion and the amount. Several other celebrities, including Kim Kardashian, have also faced fines from the SEC for their promotion of crypto investments.