Lindsay Lohan and Jake Paul Among Crypto Endorsers Charged by SEC
The Securities and Exchange Commission on Wednesday announced charges against a prominent cryptocurrency entrepreneur and a group of celebrities who promoted his business, including actress Lindsay Lohan.
The SEC filed a complaint in a federal court in the Southern District of New York charging the founder, Justin Sun, with securities law violations related to his management of three crypto companies. The agency also accused eight celebrities, including Lohan and social media influencer Jake Paul, of illegally promoting Mr. Sun’s cryptocurrencies.
Mrs. Lohan, Mr. Paul and four of the other celebrities agreed to pay a total of $400,000 to settle the allegations.
The SEC charges are the latest in a series of federal enforcement actions targeting the crypto industry, which has faced increasing scrutiny in the nearly five months since the implosion of FTX, the exchange founded by Sam Bankman-Fried.
So far this year, the SEC has levied fines and penalties against crypto lending firms and settled a case with Kraken, one of the largest US crypto exchanges. At the same time, federal banking regulators have expressed growing skepticism about crypto, increasing pressure on a freewheeling industry after a procession of bankruptcies and market meltdowns over the past year.
On Wednesday, crypto exchange Coinbase announced that it had received a so-called Wells notice from the SEC, which warned that the agency plans to file an enforcement case against the company.
“We are confident in the legality of our assets and services and, if necessary, welcome a legal process to provide the clarity we have advocated,” the company said in a statement.
A longtime crypto investor, Mr. Sun, 32, has recently sought to brand himself as a sort of crypto diplomat, working to encourage the use of digital assets worldwide. He has served as Grenada’s representative to the World Trade Organization, and he refers to himself as “His Excellence” on social media.
But according to the SEC’s complaint, his companies — Tron Foundation, BitTorrent Foundation and Rainberry — offered cryptocurrencies that were not properly registered. Mr. Sun also engaged in manipulative trading practices that created the artificial appearance that his digital currencies were attracting strong investor interest, the complaint said.
A representative for Mr. Sun did not immediately respond to a request for comment.
According to the SEC, Mr Sun drummed up interest in his crypto projects – which included the digital coins TRX and BTT – by recruiting celebrity backers.
“Although the celebrities were paid to promote TRX and BTT, their social media touts did not disclose that they had been paid or the amounts of their payments,” the complaint said. “The public was misled into believing that these celebrities had an objective interest in TRX and BTT, and were not just paid spokespersons.”
In February 2021, Lohan promoted TRX on Twitter in exchange for a $10,000 payment, the SEC said. “Super fast and 0 fee,” she wrote. “Good job @justinsuntron.” Through an intermediary, Tron had provided Ms. Lohan with the language of the tweet, according to the SEC
In addition to her and Mr. Paul, the SEC charged DeAndre Cortez Way, the rapper better known as Soulja Boy; Austin Mahone, a singer and songwriter; Michele Anne Mason, a film director and internet personality known as Kendra Lust; Miles Parks McCollum, the rapper known as Lil Yachty; Shaffer Smith, a performer who goes by Ne-Yo; and Aliaune Thiam, an entertainer known as Akon. All but Mr. Way and Mr. Mahone settled their charges.
Under federal law, securities endorsers are required to disclose whether they received compensation for the campaign, and specify the amount. Several other celebrities, including Kim Kardashian, have also faced SEC fines for their promotion of crypto investments.
