SEC Sues Justin Sun, Cohort of Celebrities For Touting Crypto “Securities”

On Wednesday, March 22nd, the Securities and Exchange Commission filed a complaint against Tron founder Justin Sun for offering unregistered securities in the form of TRX and BTT digital assets. The Commission also alleges Sun engaged in market manipulation in connection with the same assets. The SEC also sued a cohort of celebrities for promoting the tokens.

SEC Sues Tron Founder Justin Sun For Selling Unregistered Securities, Market Manipulation

This Wednesday. the Securities and Exchange Commission filed a complaint against Justin Sun and three of his companies—Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc.—alleging the sale of unregistered securities. Furthermore, Sun stands accused of market manipulation through “extensive wash trading” and other, similar practices. 

In the complaint, the SEC is specifically naming Tronix (TRX) and BitTorrent (BTT) as the offending “crypto asset securities”. Along with the sale of unregistered securities and market manipulation, the Commission is targeting Sun and a number of celebrities for promoting the tokens without proper disclosure. 

This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure. As alleged, 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. 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.

Gary Gensler

In the press release, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, highlighted that the Commission is neutral on the issue of blockchain technology and stated that the issue at hand is separate from it. According to Grewal, Sun “used an age-old playbook to mislead and harm investors” and concluded that “this is the very conduct that the federal securities laws were designed to protect against regardless of the labels Sun and others used.”

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SEC Goes After Celebrities Who Promoted BTT and TRX

As a part of its action against Sun and his companies, the SEC also sued a number of celebrities for promoting BTT and TRX without disclosing the financial compensation they received in return. The complaint is specifically targeting Lindsay Lohan, Jake Paul, DeAndre Cortez Way (Soulja Boy), Austin Mahone, Michele Mason (Kendra Lust), Miles Parks McCollum (Lil Yachty), Shaffer Smith (Ne-Yo), Aliaune Thiam (Akon).

According to today’s press release, most of the celebrities agreed to settle with the Commission and pay a total of $400,000 without admitting or denying guilt. Austin Mahone and Soulja Boy refused the settlement. This isn’t the first time the SEC has filed a complaint against celebrities for “touting” cryptocurrencies. In October, the agency sued Kim Kardashian for her promotion of EthereumMax and she agreed to pay more than $1 million to settle the charges.

Recent months have seen an increasing number of celebrities, traditional, and coming from newer media sued for promoting cryptocurrencies. Soon after the collapse of FTX in November, a group of notables including Tom Brady and Larry David was sued for their connections with the exchange. Another similar complaint was filed against a number of Youtube influencers, also for allegedly promoting Sam Bankman-Fried’s bankrupt company without offering proper disclosure.

Do you think celebrities should be held accountable for promoting cryptocurrencies? Let us know in the comments below.