SEC announced civil charges against Tron founder Justin Sun for engaging in crypto violations. Along with him are eight celebrity backers that will also be charged, including Lindsay Lohan, Jake Paul, Soulja Boy, Ne-yo, and more.
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A woman walks past signs advertising cryptocurrency banking at Union Station in Washington, DC, on March 16, 2023.
Suing Justin Sun and Celebrity Backers
Crypto mogul Justin Sun was charged by the Securities and Exchange Commission for fraud and securities violations, along with his three companies, Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc.
The Verge reported that the entrepreneur engaged in market manipulation and unregistered offer and sale of securities with crypto assets TRX and BTT.
As per SEC Chair Gary Gensler, this case shows the high-risk investors face when asset securities are offered and sold without proper disclosure.
Aside from Sun, SEC also filed charges against eight celebrities who backed the coin for not disclosing that they were being paid to do so and how much money they earned.
The list includes Lindsay Lohan, Jake Paul, Soulja Boy (DeAndre Cortez Way), Austin Mahone, Kendra Lust (Michele Mason), Lil Yachty (Miles Parks McCollum), Ne-Yo (Shaffer Smith), and Akon (Aliaune Thiam).
With the exception of Mahone and Akon, the celebrities have settled charges with a total of $400,000 without admitting or denying the charges.
Crypto Violations
CNBC reported that Sun held unregistered bounty programs that would ask users to promote BTT and TRX on social media platforms, and encouraged them to recruit though Discord and Telegram Channels.
SEC claims, "The public was misled into believing that these celebrities had an unbiased interest in TRX and BTT, and were not merely paid spokespersons."
Sun has allegedly used an age-old playbook to mislead and harm investors by offering securities without registration and requirements and manipulating them for those securities.
Through this process, Sun would reward the users involved with crypto, leading to manipulating wash trading of TRX to create a fabricated facade that will attract investors with its appearance.
Meanwhile, his team would engage with several TRX wash trades between accounts that the company has controlled. He directed his employees to engage in more than 600,000 wash trades from at least April 2018 to February 2019.
Also Read: Tron Founder Justin Sun Buys $10.5 Million Worth NFT Joker Tpunk
Barron's reported that each of these unregistered offers and sales violated the Securities Act's Section 5, which aims for parties involved to mandatory disclosures and requires registration statements as a way to ensure future investors have access to approved information for public offerings.
The complaint was filed in the United States District Court for the Southern District of New York, and conducted by Adam B. Gottlieb, Ann Rosenfield, John Lucas, and John Marino. Meanwhile, Gottlieb will also lead SEC's litigation along with Timothy Halloran and will be supervised by Melissa Armstrong.
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