On Wednesday, the Securities and Exchange Commission (SEC) filed charges against cryptocurrency entrepreneur Justin Sun and his three companies, Tron Foundation, BitTorrent Foundation, and Rainberry (formerly BitTorrent), for fraud and other securities law violations. Sun and his companies have been accused of offering and selling unregistered cryptocurrencies Tronix (TRX-USD) and BitTorrent (BTT-USD)
Additionally, the SEC charged eight celebrities for illegally promoting Sun’s cryptocurrencies without disclosing their compensation.
These celebrities include actress Lindsay Lohan, YouTube star Jake Paul, rappers Soulja Boy and Lil Yachty, singers Ne-Yo, Akon, and Austin Mahone, and adult film star Kendra Lust.
The SEC also accused Sun and his companies of engaging in fraudulent market manipulation of TRX through extensive wash trading, an illegal practice involving simultaneous or near-simultaneous trades of a security to create the appearance of active trading without any change in beneficial ownership.
Gurbir Grewal, director of the SEC’s Division of Enforcement, stated that Sun and his associates followed an old playbook to deceive investors by offering securities without adhering to registration and disclosure requirements, while manipulating the market for these securities. Furthermore, Sun paid celebrities to promote the unregistered offerings without disclosing their compensation.
Apart from Soulja Boy and Mahone, the charged celebrities agreed to pay over $400,000 in total for disgorgement, interest, and penalties to settle the charges. Grewal emphasized that although they are neutral about the technologies involved, the SEC is committed to protecting investors.
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