Crypto entrepreneur Justin Sun and his three companies have been charged by the United States Securities and Exchange Commission (SEC) with participating in wash trading with the Tronix (TRX) token, as well as conducting unregistered offers and sales of TRX and BitTorrent (BTT) tokens.
Furthermore, the SEC announced that it had filed charges against eight American celebrities who had promoted TRX and/or BTT without disclosing that they had been paid to do so, and also failed to disclose the amount they were paid. This information was disclosed in a press release issued by the SEC on Wednesday.
The list of celebrities includes actress and singer Lindsay Lohan, social media influencer and professional boxer Jake Paul, rapper and record producer DeAndre ‘Soulja Boy’ Way, singer Austin Mahone, and porn star Michele Mason, known as ‘Kendra Lust’. The other celebrities charged were rapper and record producer Miles ‘Lil Yachty’ McCollum, singer Shaffer ‘Ne-Yo’ Smith, and singer and entrepreneur Aliaune ‘Akon’ Thiam.
The SEC alleged in a complaint filed in a New York district court that Justin Sun engaged in “extensive wash trading,” artificially inflating the trading volume of TRX in the secondary market and violating anti-fraud and market manipulation provisions of federal securities laws. The regulator also accused the TRON founder of earning $31 million in illegal profit from the sale of “unregistered” TRX in the secondary market.
According to the SEC, Sun directed his employees to execute over 600,000 wash trades of TRX between two crypto asset trading platform accounts he controlled, with between 4.5 million and 7.4 million TRX wash traded daily from at least April 2018 to February 2019.
Moreover, the SEC accused Sun and his three companies, Tron Foundation Ltd., BitTorrent Foundation Limited and Rainberry Inc., of conducting various unregistered investment programs. These programs included “bounty programs” in which they offered and sold TRX and BTT as investments, and unregistered monthly “airdrops” where they sold BTT to investors, including those who reside in the US.
Gary Gensler, the SEC Chair, noted in the statement:
This case demonstrates again the high-risk investors face when crypto asset securities are offered and sold without proper disclosure.
Except for ‘Soulja Boy’ and Mahone, all the celebrities were willing to settle the charges by paying a sum of more than $400,000 without admitting or denying the findings, according to the SEC.
Earlier in December last year, the SEC charged eight individuals with operating a $100 million securities fraud scheme, using social media platforms Twitter and Discord to manipulate exchange-traded stocks.
