Eight celebrities, including actor Lindsay Lohan and YouTuber-turned-boxer Jake Paul, have been slapped with a formal complaint accusing them of promoting cryptocurrencies without disclosing that they were paid to do so.
The SEC charges are part of the federal agency’s broader enforcement action against cryptocurrency mogul Justin Sun and three of his companies: Iron Foundation Ltd., BitTorrent Foundation Ltd. and Rainberry Inc.
The stars posted on social media about Sun’s Tronix and BitTorrent cryptocurrency titles “without disclosing how they were compensated and the amount of their compensation,” the SEC said in a press release.
Celebrities include Lohan, Paul, rapper Lil Yachty, songwriter Austin Mahone, rapper Soulja Boy, porn star Kendra Lust, songwriter Ne-Yo and singer Akon. Six of them agreed to pay penalties of more than $400,000 without admitting or denying the charges, according to the SEC. Mahone and Soulja Boy are the only two who have yet to agree to settle down, the agency said.
HuffPost has reached out to all eight stars for comment.
“Sun paid celebrities with millions of social media followers to promote off-the-record trades, specifically instructing them not to disclose their compensation,” said Gurbir Grewal, director of the SEC’s enforcement division.
“Sun and others used an old playbook to mislead and harm investors by first offering securities without meeting registration and disclosure requirements and then manipulating the market for those securities,” Grewal added.
Sun blew up the foreclosure action at a Post on Twitter Wednesday.
“Today’s civil complaint from the SEC is just the latest example of actions taken against well-known players in the blockchain and crypto space,” he wrote. “We believe the complaint is unfounded, and in the meantime we will continue to build the most decentralized financial system.”
Some of the evidence supporting the SEC’s charges was still online Thursday morning, including a tweet from February 2021 in which Lohan tagged Sun and promoted crypto assets including Tronix. According to the SEC order obtained by BuzzFeed News, Lohan was fined a total of $40,670.
A rep for Lohan told the outlet that she was contacted in March 2022 and didn’t know she had to disclose her payment. The specific amounts owed by the other five stars who took office remain unclear.
Paul, who recently went from YouTube influencer to professional boxer, has since deleted a tweet from around the same time in which he mentioned Tronix with a hashtag before adding a rocket emoji. Like Lohan, she did not disclose her fee.
“You get a #TRX tattoo when it hits 50 cents. @justinsuntron,” Lil Yachty wrote in a now-deleted tweet from November 2021, according to BuzzFeed News.
Meanwhile, Sun is accused of the fraudulent act of wash trading, in which a stock is falsely made to appear to be actively and successfully traded. The SEC says it did this by getting famous people to hunt for coins on social media, which manipulated the markets.
“Sun and its companies not only targeted US investors in their unregistered offers and sales … but also coordinated unregistered trading on an unregistered trading platform to create the deceptive appearance of active trading in TRX,” said SEC Chairman Gary Gensler, press release.
This is not the first time celebrities have faced accusations of participating in crypto schemes. Kim Kardashian settled for $1.26 million to promote a coin called EMAX. And Tom Brady and Larry David are among several celebrities named in a class action for promoting FTX, the cryptocurrency exchange that collapsed in November.
Celebrities routinely adopt branding deals and partnerships, from fashion and technology to spirits. But some approvals, such as for cryptocurrencies, have additional rules designed to protect consumers.
“This is exactly the behavior that the federal securities laws were designed to protect against, regardless of the labels used by Sun and others,” Grewal said.
