Top regulator SEC has filed another lawsuit against crypto promoters, this time targeting Tron’s Justin Sun and other celebrities.
The US top regulator, the Securities and Exchange Commission (SEC), accused Justin Sun, YouTuber Jake Paul, actress Lindsay Lohan, and other celebrities of fraud and several security law violations.
The lawsuit was filed on March 22nd in the US District Court for the Southern District of New York. It targeted the accused for their involvement with two “crypto asset securities,” Tron (TRX) and BitTorrent (BTT).
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Justin Sun and his companies, Tron Foundation, Rainberry, and the BitTorrent Foundation, were accused of “the unregistered offer and sale of crypto asset securities.” The regulator also accused the executive of using wash trading tactics to manipulate the secondary market.
Wash trading involves buying and selling a security to mislead the market. In this case, the SEC argues that Justin Sun made efforts to make the TRX and BTT coins appear to have higher trading volumes to deceive customers.
As alleged, Sun and his companies not only targeted US 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.
SEC claims that Justin Sun also hired celebrity influencers to promote the two tokens on social media.
The SEC has accused eight celebrities of illegally promoting TRX and BTT. The accused individuals are Lindsay Lohan, Jake Paul, DeAndre Cortez Way (Soulja Boy), Austin Mahone, Michele Mason (Kendra Lust), Miles Parks McCollum (Lil Yachty), Shaffer Smith (Ne-Yo), and Aliaune Thiam (Akon).
In the court filing, the regulator argues that the celebrities were "illegally touting TRX and/or BTT" while failing to disclose the nature of the contract, in which they were paid to promote the coins.
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 the celebrities were paid for their tweets.
According to the regulators, the accused violated the anti-fraud and market manipulation rules covered in the federal security laws. Justin Sun’s firms allegedly violated Section 5 of the Security Act by facilitating the sale of unregistered BTT tokens in monthly airdrops.
Six of the eight celebrities, including Lindsay Lohan, Aliaune Thiam, and Jake Paul, settled with the SEC for promoting the two tokens without disclosing that they were paid for the work.