Justin Sun, a Grenadian diplomat, has been charged with fraud and offering unregistered securities, according to the Securities and Exchange Commission SEC. The SEC also charged celebrities and influencers, including Soulja Boy, Lindsay Lohan and Jake Paul, for committing fraud and securities violations.
According to the SEC, Justin Sun has been accused of manipulating the trading activity of the Tronix and BitTorrent token to create a false impression of active trading. Sun is facing charges for offering and selling unregistered securities, a charge that has also been brought against other cripto exchanges and offerings such as Genesis, Gemini, and Do Kwon's Terraform Labs.
Sun allegedly induced investors to purchase TRX and BTT tokens by orchestrating a promotional campaign in which he and his celebrity promoters hid the fact that celebrities were paid for their tweet, Gensler said.
The eight celebrities and influencers were :
All except for Soulja Boy and Mahone agreed to pay $400,000 in disgorgement, interest and penalties to settle the charges. The settlements were not an admission of guilt.
On February 11, 2021, Lohan, a well-known actress, singer, and internet personality, praised a crypto asset security that was being offered and sold on social media. Lohan did not disclose that she was being paid to give publicity to the security by the entity offering and selling it to the public. Lohan s failure to disclose this compensation violated Section 17 b of the Securities Act, which makes it unlawful for any person to promote security without disclosure of receipt and amount of compensation from an issuer, SEC wrote.
Celebrity backers would promote the TRX and BTT token on social media and recruit others to Tron-affiliated Telegram and Discord channels.
Gurbir Grewal, SEC enforcement chief Gurbir Grewal said that Tron and his backers alleged behavior was part of an age-old playbook to mislead and harm investors.
According to the charges, SEC said that from August 2017 to the present, Tron and Sun have engaged in the continuous public offer and sale of TRX token. According to Tron s and Sun's materials and public statements, purchasers of the TRX token would have a reasonable expectation of profits from their investment in the token. Tron and Sun promoted the possibility of significant returns to investors through buying, holding and trading TRX token. Tron and Sun worked to list TRX on a number of platforms, including within the United States, and publicly encouraged investors to purchase TRX through the new venues. Tron and Sun frequently touted the market capitalization, price and trading volume of TRX, and published articles advising followers of purportedly opportunistic times to invest in TRX. At the same time, Sun paid celebrities with millions of social media followers to tout the unregistered offerings, while directing them not to disclose their compensation. The federal securities laws were designed to protect against whatever labels Sun and others use, according to Grewal.
Sun spokesman at Tron did not immediately return a request for comment.