A number of celebrities have been charged with violating securities laws for promoting cryptocurrency. Lindsay Lohan, rapper Miles Parks McCollum (Lil Yachty), pop singer Shaffer Smith (Ne-Yo), Youtuber turned boxer Jake Paul, and others were all cited by the Securities and Exchange Commission (SEC) on Wednesday.
The complete list of celebrities also includes DeAndre Cortez Way (Soulja Boy), Austin Mahone, porn star Michele Mason (Kendra Lust), and Aliaune Thiam (Akon), per a release by the SEC. Crypto asset entrepreneur Justin Sun, who ran three crypto companies, is the man responsible for hiring the celebrities. He’s being charged with fraud.
The SEC claims that Sun illegally sold “TRX (Tronix) and BTT (BitTorrent) as investments” in a complicated scheme involving artificially inflating of the value of the crypto assets and then selling them on the secondary market. The celebs were charged with “illegally touting TRX and/or BTT without disclosing that they were compensated for doing so and the amount of their compensation.”
Every celebrity on the list except Mahomes and Soulja Boy have settled for “more than $400,000 in disgorgement, interest, and penalties to settle the charges, without admitting or denying the SEC’s findings.”
SEC chair Gary Gensler said the case shows how risky it is to invest in crypto, especially when you’re not being told the whole truth about them.
“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.”
Deadline talked to Lohan’s representative, who said that the actress didn’t know about the requirements for disclosure.
“Lindsay was contacted in March 2022 and was unaware of the disclosure requirement. She agreed to pay a fine to resolve the matter,” spokeswoman Leslie Sloane said.
Gurbir S. Grewal, director of the SEC’s Division of Enforcement, put the lion’s share of the blame on Sun.
“Sun and others used an age-old playbook to mislead and harm investors by first offering securities without complying with registration and disclosure requirements and then manipulating the market for those very securities.”
That manipulation, the release said, involved something called “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.”
Sun is said to have made more than $30 million with his scheme.