The Securities and Exchange Commission has charged eight celebrities for illegally touting two cryptocurrencies tied to entrepreneur Justin Sun and his companies Tron Foundation, BitTorrent Foundation, and Rainberry.
The agency said the tokens, known as Tronix (TRX) and BitTorrent (BTT), were promoted by Lindsay Lohan, Jake Paul, DeAndre Cortez Way aka Soulja Boy, Austin Mahone, Michele Mason aka Kendra Lust, Miles Parks McCollum aka Lil Yachty, Shaffer Smith aka Ne-Yo and Aliaune Thiam aka Akon, without disclosing that they were compensated for it or the amount of their compensation.
SEC Chair Gary Gensler has argued that virtually all cryptocurrencies should be considered securities under existing law and subject to his agency’s oversight. Industry advocates have pushed back, arguing that the agency is overstepping its authority and that the unique features of cryptocurrencies make them different from conventional financial assets.
“As alleged in the complaint, Sun and others used an age-old playbook to mislead and harm investors by first offering securities without complying with registration and disclosure requirements and then manipulating the market for those very securities,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement. “At the same time, Sun paid celebrities with millions of social media followers to tout the unregistered offerings, while specifically directing that they not disclose their compensation. This is the very conduct that the federal securities laws were designed to protect against regardless of the labels Sun and others used.”
The complaint claims that Thiam, Paul and Smith were paid in crypto assets valued at approximately valued at approximately $42,000, $25,019, and $12,000, respectively. Meanwhile, Lohan and McCollum were each given payments of $10,000 and Mason was paid $955.
With the exception of Cortez Way and Mahone, the celebrities agreed to pay a total of more than $400,000 in disgorgement, interest, and penalties to settle the charges, without admitting or denying the SEC’s findings.
The latest enforcement action by the SEC comes after Kim Kardashian agreed to pay $1.2 million last year to settle charges related to her endorsement of EMAX tokens. In addition, Tom Brady and Larry David are among a group of celebrity endorsers who have been sued by investors of FTX following the exchange’s bankruptcy.