- Justin Sun has been charged with a litany of allegations while eight celebrities he hired to tour crypto are charged with not disclosing they’d been compensated to tout the tokens.
- The celebrities include Lindsay Lohan, Soulja Boy, Lil Yachty and others.
- The SEC further alleges Sun instructed employees to conduct 600 000 wash trades per day.
The Securities and Exchange Commission (SEC) in the US has announced charges against crypto entrepreneur Justin Sun and his three companies, BitTorrent Foundation Ltd., Rainberry Inc. and Tron Foundation Limited.
The charges relate to the alleged unregistered offer and sale of the crypto asset securities Tronix (TRX) and BitTorrent (BTT).
Through multiple, unregistered “bounty programs” Sun and his companies purportedly offered and sold TRX and BTT. These programs directed those interested in the tokens to promote those tokens on social media while also recruiting others to join the Tron-affiliated Telegram and Discord channels. In return for getting users to sign up for an account, recruiters would get TRX and BTT distributions, the SEC alleges.
“The complaint further alleges that Sun, BitTorrent Foundation, and Rainberry offered and sold BTT in unregistered monthly airdrops to investors, including in the United States, who purchased and held TRX in Tron wallets or on participating crypto asset trading platforms. According to the complaint, each of these unregistered offers and sales violated Section 5 of the Securities Act,” the SEC wrote in a press release.
In addition, the SEC charged eight celebrities for illegally touting TRX, BTT or both without disclosing that they had been compensated to do so.
The eight celebrities are:
- Jake Paul
- Lindsay Lohan
- DeAndre Cortez Way (Soulja Boy)
- Austin Mahone
- Michele Mason (Kendra Lust)
- Miles Parks McCollum (Lil Yachty)
- Shaffer Smith (Ne-Yo)
- Aliauna Thiam (Akon)
Furthermore, the SEC also charged Sun and his companies with fraudulently manipulating the secondary market for TRX through extensive wash trading. This involves the purchase and sale of a security happening at or around the same time to make it appear as if the security is in demand. The problem, however, is that there isn’t a change in beneficial ownership.
The SEC alleges that between April 2018 and February 2019, Sun instructed employees to conduct more than 600 000 wash trades of TRX on a platform he controlled. This instruction saw between 4.5 million and 7.4 million TRX being washed every day.
Furthermore, the SEC alleges that Sun made illegal, unregistered offers and sales of TRX on the secondary market generating $31 million.
“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. 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,” SEC chair, Gary Gensler said in a statement.
The eight celebrities, except Mahone and Soulja Boy have agreed to pay a total of $400 000 in disgorgement, interest and penalties to settle the charges. With that having been said, the celebrities don’t admit or deny the findings presented by the SEC.
“While we’re neutral about the technologies at issue, we’re anything but neutral when it comes to investor protection,” said the director of the SEC’s Division of Enforcement Gurbir Grewal.
“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. 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,” Grewal concluded.
[Image – CC 0 Pixabay]
