The U.S. Securities and Exchange Commission (SEC) has charged eight celebrities, including Lindsay Lohan, Jake Paul, and Ne-Yo, with participating in an illegal cryptocurrency scheme. They are accused of promoting two crypto tokens, Tronix (TRX) and BitTorrent (BTT), on their social platforms without disclosing that they were compensated for doing so and the amount of their compensation.
The charges come as part of a broader case filed against crypto entrepreneur Justin Sun and his companies Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc (formerly BitTorrent). Sun is accused of fraudulently manipulating the trading activity of TRX and BTT, making it appear as if the tokens were actively traded in a crime known as "wash trading."
According to the SEC, Sun and his companies sold the crypto assets as investments through various unregistered "bounty programs," which encouraged interested parties to promote the tokens on social media and recruit others to Tron-affiliated Telegram and Discord channels.
SEC Chair Gary Gensler stated, "This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure."
All the charged celebrities except Soulja Boy and Austin Mahone have agreed to pay a combined total of over $400,000 in disgorgement, interest, and penalties to settle the charges without admitting or denying the SEC's findings. Lohan, with 8.4 million Twitter followers at the time of her promotional tweet, paid $10,000 to the SEC and an additional $30,000 in penalties. YouTuber and boxer Jake Paul was ordered to pay more than $100,000.
The other celebrities charged in the case are rapper Soulja Boy (DeAndre Cortez Way), singer Austin Mahone, adult film star Kendra Lust (Michele Mason), rapper Lil Yachty (Miles Parks McCollum), musician Ne-Yo (Shaffer Smith), and Senegalese-American singer Akon (Aliaune Thiam).
This high-profile case highlights the importance of proper disclosure in the promotion of crypto asset securities and the potential risks investors face when such securities are offered and sold without adequate information.