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SEC files crypto fraud charges against entrepreneur and celebrity backers Lindsay Lohan, Jake Paul, others

The Securities and Exchange Commission announced charges on Wednesday against crypto entrepreneur Justin Sun and the celebrity backers of his crypto asset companies Tronix (TRX) and BitTorrent (BTT). 

The SEC filed the complaint against Sun and his companies for the unregistered offer and sale of crypto asset securities. The commission also charged eight celebrities for "illegally touting TRX and/or BTT without disclosing that they were compensated for doing so and the amount of their compensation," it said in a press release,

The list of eight celebrities facing charges includes actress Lindsay Lohan, social media personality Jake Paul and rappers Soulja Boy and Lil Yachty.

The SEC is accusing Sun and his companies of "orchestrating a scheme to pay celebrities to tout TRX and BTT without disclosing their compensation."

Justin Sun speaks at Cryptocurrency Event in Singapore
Justin Sun speaks during the TOKEN2049 cryptocurrency event in Singapore, on Sept. 28, 2022.  Edwin Koo/Bloomberg via Getty Images

With the exception of Soulja Boy and singer Austin Mahone, the celebrities charged on Wednesday agreed to pay a total of more than $400,000 in interest and penalties to settle the charges, without admitting or denying the SEC's findings, the commission's press release said.

According to the SEC, the celebrity promotion took place as Sun and his companies were "fraudulently manipulating the secondary market for TRX through extensive wash trading, which involves the simultaneous or near-simultaneous purchase and sale of a security to make it appear actively traded without an actual change in beneficial ownership."

SEC Chair Gary Gensler said the charges highlighted the risks for investors when companies don't commit to proper disclosure. 

"Sun and his companies not only targeted U.S. 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," Gensler said. "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."

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