The U.S. Securities and Exchange Commission (SEC) has sued Justin Sun, a cryptocurrency founder of the Tron blockchain. Several high-profile celebrities are also named.
Sun is being sued on allegations of “offering for sale unregistered crypto asset securities.” Also named in the suit are the Tron foundation, the BitTorrent foundation and BitTorrent (also known as Rainberry) for the sale of its TRX and BitTorrent (BTT) tokens. The SEC has determined that both TRX and BTT qualify as unregistered securities. “The Sun defendants offered and sold TRX and BTT as securities and were thus required to register those offers and sales with the SEC unless an exemption from registration was available,” the filing states.
Celebrities named in the lawsuit include Linsday Lohan, Jake Paul, Soulja Boy, Lil Yachty, Akon, Ne-Yo, Austin Mahone, and Michelle Mason.
“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,” the SEC alleges in their filing. “Thus, the public was misled into believing that these celebrities had unbiased interest in TRX and BTT, and were not merely paid spokespersons.”
All of the celebrities named aside from Soulja Boy and Austin Mahone have agreed to pay over $400,000 “in disgorgement, interest, and penalties” to settle the charges, without admitting or denying culpability regarding the allegations brought forth by the SEC. “This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure,” says SEC Chair Gary Gensler.
“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 they celebrities were paid for their tweets.”