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Eight celebrities, including actress Lindsay Lohan, influencer Jake Paul and rapper Soulja Boy, have been charged by federal regulators with illegally touting two cryptocurrencies and failing to disclose that they were paid to do so.
The two cryptocurrencies, Tronix (TRX) and BitTorrent (BTT), were sold by crypto entrepreneur Justin Sun, who was also charged by the Securities and Exchange Commission on Wednesday.
Sun and three of his wholly owned companies – Tron Foundation Limited, BitTorrent Foundation Ltd. and Rainberry Inc. — are accused of unregistered offers and sales of crypto-asset securities and manipulation of the secondary market by “wash trading,” which involves the rapid buying and selling of cryptocurrencies to make them appear to be actively traded.
The SEC also says Sun and the companies paid celebrities with huge social media followings to hype TRX and BTT and asked them not to disclose their compensation.
“This case once again demonstrates the high risk investors face when crypto-asset securities are offered and sold without proper disclosure,” SEC Chairman Gary Gensler said in a statement.
The other celebrities charged in the scheme are:
- Austin Mahone
- Michele Mason (aka Kendra Lust)
- Miles Parks McCollum (aka Lil Yachty)
- Shaffer Smith (aka Ne-Yo)
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Each of the eight is accused of illegally calling one or both of the securities.
Six of the celebrities — excluding Soulja Boy (whose legal name is DeAndre Cortez Way) and Mahone — have agreed to pay a total of more than $400,000 to settle the allegations without admitting or denying the SEC’s findings.
NPR reached out to representatives for each of the celebrities with a request for comment, but did not immediately hear back from seven of the eight. A representative for Jake Paul declined to comment.
Crypto’s meteoric rise in popularity led to a wave of celebrities linking to various digital currencies, but regulators’ interest in exposing illegal behavior in the crypto market has led to several of these stars getting into legal trouble.
In October, the SEC accused Kim Kardashian of using her Instagram account to promote a cryptocurrency without disclosing that she was being paid to promote it.