U.S. SEC sues Jake Paul, Lindsay Lohan, Soulja Boy, other celebrities over crypto sales

NEW YORK –

The U.S. Securities and Exchange Commission on Wednesday sued Chinese cryptocurrency entrepreneur Justin Sun, accusing him and other defendants of illegally selling crypto securities and scheming to artificially inflate trading volume in crypto assets.

Beginning around August 2017, Sun and his companies Tron Foundation Limited, BitTorrent Foundation Limited and Rainberry Inc engaged in a scheme to distribute billions of crypto assets known as Tronix (TRX) and BitTorrent (BTT), the SEC said. That included the use of “bounty programs” directing interested parties to promote the tokens on social media, including to U.S.-based investors, the SEC said.

TRX and BTT were sold as securities, and thus their sale needed to be registered with the SEC, the regulator said in its complaint filed in Manhattan federal court.

The agency also charged eight celebrities, including Lindsay Lohan and Jake Paul, for illegally touting those assets without disclosing they were being compensated for it.

Sun also violated laws against fraud and market manipulation by orchestrating a scheme to inflate apparent trading volume in TRX in the secondary market through wash trading, the SEC said. From at least April 2018 to February 2019, he allegedly directed employees to engage in over 600,000 wash trades of TRX between two accounts he controlled. This garnered proceeds of $31 million from illegal, unregistered offers and sales of the tokens, the SEC said.

The other celebrities charged were DeAndre Cortez Way (Soulja Boy), Austin Mahone, Michele Mason (Kendra Lust), Miles Parks McCollum (Lil Yachty), Shaffer Smith (Ne-Yo) and Aliaune Thiam (Akon).

All but Cortez Way and Mahone agreed to pay a total of more than $400,00 in disgorgement, penalties and interest to settle the charges, without admitting or denying the SEC’s findings.

Lawyers for the celebrities and Rainberry did not respond immediately to requests for comment. A lawyer for Sun could not immediately be identified.

(Reporting by Chris Prentice and Jonathan Stempel in New York; Editing by Lisa Shumaker)