Justin Sun, Lindsay Lohan, And Other Celebrities Sued By SEC For Crypto Sales

The US Securities and Exchange Commission (SEC) has charged Chinese cryptocurrency entrepreneur Justin Sun with fraud and accused eight celebrities of illegally promoting his crypto assets. Sun and his companies, Tron Foundation, BitTorrent Foundation, and Rainberry, were accused of scheming to distribute billions of crypto assets, known as Tronix and BitTorrent, and artificially inflating trading volume since August 2017. Sun was also accused of concealing payments to celebrities to promote Tronix and BitTorrent on social media accounts, misleading the public into thinking they had an unbiased interest. The SEC said Sun's activity generated tens of millions of dollars of illegal profit at other investors' expense.

The Charges

The SEC has been ratcheting up efforts to crack down on the crypto industry, which SEC Chair Gary Gensler has called a “Wild West” riddled with misconduct. Its efforts gathered pace after November's collapse of Sam Bankman-Fried's cryptocurrency exchange FTX. In its complaint filed in Manhattan federal court, the SEC said Sun sold Tronix and BitTorrent as securities, and thus their sale needed to be registered with the agency. Sun inflated apparent trading volume in Tronix through extensive “wash trading,” involving simultaneous or near-simultaneous purchases and sales with no real change in ownership. From at least April 2018 to February 2019, Sun ordered employees to conduct hundreds of thousands of wash trades between two accounts he controlled, the SEC said.

Celebrities Involved

The other celebrities charged included the singers Akon, Austin Mahone, and Ne-Yo, social media personality and boxer Jake Paul, rapper Lil Yachty, and porn actress Kendra Lust. All but Soulja Boy and Mahone agreed to settle, without admitting wrongdoing, and together paid more than $400,000. Andrew Brettler, a lawyer for Lindsay Lohan, said the actress did not know about the disclosure requirements until last March. A lawyer for Kendra Lust declined to comment. Lawyers for the other celebrities did not respond immediately to requests for comment.

Reaction

Sun did not immediately respond to a request for comment via Twitter. A lawyer for him could not immediately be identified. “This case demonstrates again the high-risk investors face when crypto asset securities are offered and sold without proper disclosure,” SEC Chair Gary Gensler said in a statement.

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