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22 mar 2023

SEC charges Tron’s Justin Sun and celebrities including Lindsay Lohan, Jake Paul

The Securities and Exchange Commission charged crypto entrepreneur Justin Sun, and three of his companies including digital asset network company Tron Foundation Limited, for the unregistered offer and sale of two “crypto asset securities," while also accusing eight celebrities of violating securities laws in touting related tokens.

Sun and his companies — Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc. —  allegedly offered and sold Tronix and BitTorrent as investments “through multiple unregistered ‘bounty programs.’” Those cryptocurrencies also go by TRX and BTT.

The TRX token, which the fourteenth largest crypto by market capitalization, declined 14% to 5.8 U.S. cents at 3:55 p.m. EDT, according to TradingView data. 

The agency also charged eight celebrities for “illegally touting” TRX and BTT without disclosing that they were being paid. Those celebrities include actress Lindsay Lohan, media personality Jake Paul, rapper DeAndre Cortez Way or Soulja Boy, singer Austin Mahone and four others.  

The SEC said the celebrities, except for Cortez Way and Mahone, agreed to pay $400,000 in disgorgement, interest and penalties to settle the charges without admitting or denying the SEC’s findings.  

Wash trades

This is not the first time the SEC has charged celebrities for similar charges. The SEC charged Kim Kardashian for unlawfully touting EthereumMax’s token last year. 

The SEC is also accusing Tron-founder Sun of violating federal securities laws after he allegedly conducted a scheme to artificially inflate the trading volume of TRX in the secondary market.  

The SEC said Sun told his employees to “engage in more than 600,000 wash trades of TRX” with about 4.5 million and 7.4 million TRX wash traded daily.  

“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,” SEC Chair Gary Gensler said in a statement. “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.” 

(Updates with TRX token price in third paragraph.)

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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