A string of celebrities including Lindsay Lohan and singers Akon and Ne-Yo have coughed up tens of thousands of dollars after being charged by US authorities for illegally promoting cryptocurrency.
The US Securities and Exchange Commission (SEC) on Wednesday charged Chinese cryptocurrency entrepreneur Justin Sun with fraud, and accused eight celebrities with illegally promoting his crypto assets.
Other celebrities charged include singers Austin Mahone and Soulja Boy, 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 US$400,000 (£32,452).
Andrew Brettler, a lawyer for Ms Lohan, said the actress did not know about the disclosure requirements until last March.
“From the outset, she cooperated with the SEC’s investigation and ultimately agreed to disgorge the small amount of money she received and paid a fine to resolve this matter,” her attorney Andrew Brettler said.
Sun and his companies Tron Foundation, BitTorrent Foundation and Rainberry have been accused of scheming to distribute billions of crypto assets and artificially inflating trading volume since August 2017.
He was also accused of concealing payment to celebrities to promote assets Tronix (TRX) and BitTorrent (BTT) on social media accounts, misleading the public into thinking they had “unbiased interest in TRX and BTT, and were not merely paid spokespersons”.
The SEC said Sun’s activity generated tens of millions of dollars of illegal profit at other investors’ expense.
“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.
The SEC has been ramping up efforts to crack down on the crypto industry, which Mr Gensler described as the “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 TRX and BTT as securities, and thus their sale needed to be registered with the agency.
It said Sun inflated apparent trading volume in TRX 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 workers to conduct hundreds of thousands of wash trades between two accounts he controlled, the SEC said.
By creating a false and misleading appearance of legitimate trading, Sun made it easier to sell TRX while maintaining stable prices, and generated US$31 million (£25 million) of proceeds from illegal, unregistered offers and sales of TRX, the SEC said.
