Jake Paul, Lindsay Lohan among 8 charged in SEC cryptocurrency case
The SEC also charged entrepreneur Justin Sun and three of his companies for “the unregistered offer and sale” of TRX and BTT.
The complaint, filed Wednesday in the U.S. District Court for the Southern District of New York, also alleged that Sun “directed the manipulative wash trading of TRX to create the artificial appearance of legitimate investor interest and keep TRX’s price afloat,” referring to a scheme in which securities are essentially traded at the same time between associated entities, making the asset “appear actively traded without an actual change in beneficial ownership.”
Sun — a Chinese entrepreneur who became a citizen of Grenada, the small island nation in the West Indies that grants citizenship to those who make large investments in the country — gained worldwide attention in 2019 after he paid $4.6 million to have lunch with Warren Buffett, but then canceled it, apologizing for “excessive self-promotion.”
The messages about the cryptocurrencies were posted on social media, according to the SEC. Lohan, who has more than 8 million Twitter followers, tweeted on Feb. 12, 2021 that she was “already liking” three of Sun’s cryptocurrencies, including TRX. “Super fast and 0 fee,” she wrote. “Good job @justinsuntron.”
In March 2021, she promoted an auction — in TRX — for an NFT, or non-fungible token, of one of her songs. “Just over 9 hours left to bid!” she tweeted on April 2, 2021.
Paul and Lohan — along with rapper Lil Yachty (whose legal name is Miles Parks McCollum) — were among the six celebrities who agreed to collectively pay a total of more than $400,000 to settle the charges without admitting wrongdoing; the six were not named in the complaint, as Mahone and Soulja Boy were.
Representatives for Lohan, Paul, Mahone, Soulja Boy and Lil Yachty did not respond to requests for comment. Tron and BitTorrent, which the SEC said are entirely owned by Sun, and the foreign ministry of Grenada, which appointed Sun as ambassador to the World Trade Organization in 2021, did not respond to requests for comment.
The charges were not the first actions by the SEC against celebrities it alleged had illegally promoted cryptocurrencies. Kim Kardashian agreed last year to pay $1.26 million to settle SEC charges after she promoted EthereumMax (EMAX) on social media.
The SEC on Wednesday also issued a legal notice to Coinbase, according to the cryptocurrency platform. Coinbase said it had received a “Wells notice,” a warning of forthcoming charges. The SEC “told us they have identified potential violations of securities law, but little more. We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so,” Coinbase’s chief legal officer, Paul Grewal, wrote in a blog post. The SEC did not immediately respond to a request for comment.
The charges, if brought, would be the most significant regulatory action yet against Coinbase, which has positioned itself as a sort of responsible adult in the room as other crypto platforms — namely FTX — have collapsed.
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