Jake Paul settles with SEC in encryption case

Jake Paul, the YouTuber-turned-prize fighter, was among several celebrities who agreed to pay a total of $400,000 in disgorgement, interest and penalties to settle charges that they designated a crypto asset without disclosing that they were paid to do so, the securities and It was announced by the Exchange Commission on Wednesday.

In settling, Paul did not admit or deny the allegations, the SEC said.

An SEC filing on Wednesday charged eight celebrities including Paul. It cited Paul’s tweet on February 12, 2021, promoting Tronix (TRX) tokens. The tokens are securities offered publicly by Tron Foundation Limited, which the filing indicated is owned by Yuchen “Justin” Sun, who was tagged in the tweet. The tweet was in response to one from rapper Lil Yachty, who was also charged, and included a TRX hashtag and a rocket ship emoji.

According to the SEC, Paul’s promotion in exchange for crypto assets was valued at $25,019. Paul had 3.8 million Twitter followers at the time, the filing said. The SEC also cited Section 17(b) of the Securities Act, which states in part that it is “unlawful for any person to: publish, give publicity to… [a security] against consideration received or to be received.”

The filing indicated that Paul’s tweet came nearly four years after the SEC’s Division of Enforcement and Office of Compliance Inspections and Investigations issued a statement that read “[a]a celebrity or other person promoting a virtual token or coin that is a security must disclose the nature, scope and amount of compensation received in exchange for the promotion. A failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws.”

A representative for Paul did not immediately respond to a request for comment.

The SEC also announced charges against Sun and three of his companies “for the unregistered offering and sale of crypto-asset securities Tronix (TRX) and BitTorrent (BTT).” The commission also said in part that Sun and his companies orchestrated “a scheme to pay celebrities to tout TRX and BTT without disclosing their compensation.”

Paul, 26, suffered a split decision loss to Tommy Fury last month, the first defeat of Paul’s boxing career. Paul rose to fame thanks to his content on Vine, a now-defunct video service, then YouTube, with which he now has more than 20 million followers. In addition to his followers on YouTube and Twitter – now at 4.6 million – he has more than 22 million followers on Instagram.

The SEC announced that six of the eight charged — Paul, actress Lindsay Lohan, adult film star Kendra Lust and music artists Lil Yachty, Ne-Yo and Akon — settled. Neither admitted or denied the allegations. The commission also said that rapper Soulja Boy and singer Austin Mahone did not reach a settlement.