Yesterday, the US Securities and Exchange Commission charged Chinese cryptocurrency inventor Justin Sun with fraud. It accused eight celebrities, including Lindsay Lohan and Soulja Boy, of fraudulently advertising their crypto assets.
Sun and his firms Tron Foundation, BitTorrent Foundation, and Rainberry were accused of distributing billions of Tronix (TRX) and BitTorrent (BTT) crypto assets and inflating market volume since August 2017.
He was also accused of concealing payment to celebrities who promoted TRX and BTT on their social media profiles, causing the public to believe they had "unbiased interest in TRX and BTT and were not essentially paid, spokespersons."
According to the SEC, Sun reaped illicit profits in the tens of millions of dollars at the cost of other investors.
Gary Gensler, chairman of the Securities and Exchange Commission, stated, "this case highlights once again the high-risk investors face when crypto asset securities are offered and sold without sufficient disclosure."
Sun did not react immediately to a Twitter request for comment. A lawyer for him could not be recognized immediately.
Akon, Austin Mahone, Ne-Yo, social media sensation and boxer Jake Paul, rapper Lil Yachty, and porn actress Kendra Lust were also charged.
Everybody except Soulja Boy and Mahone agreed to settle without admitting wrongdoing and collectively paid more than $400,000 (RM1,775,000).
Andrew Brettler, Lohan's attorney, stated that the actress was unaware of the disclosure requirements until March of last year.
"She ultimately consented to disgorge the minimal amount of money she received and pay a fine to settle this dispute," her attorney Andrew Brettler said in an email statement.
Kendra Lust's attorney declined to comment. Other celebrities' attorneys did not immediately reply to demands for comment.
The SEC has intensified its efforts to regulate the cryptocurrency market, which Gensler has described as a "Wild West" rife with wrongdoing. After Sam Bankman-FTX Fried's bitcoin exchange failed in November, the company's activities accelerated.
In its complaint filed in federal court in Manhattan, the SEC alleged that Sun offered TRX and BTT as securities, requiring registration with the government.
It was alleged that Sun boosted the perceived trading volume of TRX by engaging in substantial "wash trading," which involves simultaneous or near-simultaneous purchases and sales with no actual change in ownership.
The SEC alleges that between at least April 2018 and February 2019, Sun directed hundreds of thousands of wash trades between two accounts he controlled.
By establishing a false and deceptive image of genuine trading, Sun made it simpler to sell TRX while maintaining regular pricing. According to the SEC, illicit, unregistered sales of TRX produced US$31 million in revenues.