The Securities and Exchange Commission on Wednesday announced charges against entrepreneur Justin Sun over the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT), while also bringing charges against actress Lindsay Lohan and seven other celebrities for illegally promoting investments in these crypto tokens without disclosing that they were being compensated for doing so and how much they were being paid for their endorsements.
The other celebrities were Jake Paul, DeAndre Cortez Way (Soulja Boy), Austin Mahone, Michele Mason (Kendra Lust), Miles Parks McCollum (Lil Yachty), Shaffer Smith (Ne-Yo) and Aliaune Thiam (Akon).
In addition, the SEC charged Sun and and three of his wholly owned companies with fraudulently manipulating the secondary market for TRX via extensive "wash trading," which involves the simultaneous, or near-simultaneous, purchase and sale of a security to make it appear actively traded without an actual change in beneficial ownership
The SEC's complaint, filed in U.S. District Court for the Southern District of New York, alleged that Sun and his companies offered and sold TRX and BTT as investments via various unregistered "bounty programs" that directed interested parties to promote the tokens on social media, join and recruit others to Tron-affiliated Telegram and Discord channels, and create BitTorrent accounts in exchange for TRX and BTT distributions.
The complaint further alleged that Sun, BitTorrent Foundation and Rainberry offered and sold BTT in unregistered monthly airdrops to investors, including in the U.S., who bought and held TRX in Tron wallets or on participating crypto asset trading platforms.
Each of those unregistered offers and sales violated Section 5 of the Securities Act, according to the SEC.
In addition, the SEC alleged that Sun violated the antifraud and market manipulation provisions of the federal securities laws by orchestrating a scheme to artificially inflate the apparent trading volume of TRX in the secondary market. Sun generated proceeds of $31 million from that through illegal, unregistered offers and sales of the token, according to the complaint.
