Actress Lindsay Lohan, YouTube influencer Jake Paul and several other celebrities have been charged with illegally promoting the cryptocurrencies of a Chinese entrepreneur accused of fraud.
The United States Securities and Exchange Commission (SEC) said on Wednesday it had charged Justin Sun with artificially inflating the trading volume of Tronix (TRX) and BitTorrent (BTT) and concealing payments made to celebrities to promote the tokens.
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In its complaint filed in court, the SEC said Sun, who owns the companies Tron Foundation, BitTorrent Foundation and Rainberry, directed employees to conduct hundreds of thousands of simultaneous or near-simultaneous purchases and sales of TRX and BTT with no real change in ownership.
The SEC said Sun’s efforts to create the appearance of legitimate trading made it easier to sell TRX while keeping prices stable, generating tens of millions of dollars of illegal profit at the expense of investors.
“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.
Sun did not immediately respond to a request for comment via Twitter.
Lohan, Paul, the rapper Akon, recording artists Ne-Yo and Lil Yachty, and adult actress Michele Mason are alleged to have pushed crypto investments to their millions of online followers without revealing they had been paid.
The six all agreed to pay more than $400,000 in disgorgement, interest and penalties to settle the claims, the SEC said.
Two other celebrities named in the SEC’s complaint, rapper Soulja Boy and pop singer Austin Mahone, did not reach a settlement with the SEC, the agency said.
The SEC issues civil penalties such as fines and does not press criminal charges.
US regulators have stepped up oversight of cryptocurrencies in the wake of the stunning collapse of FTX and the arrest of its founder Sam Bankman-Fried on fraud charges last year.