cryptonews.com
The controversial crypto entrepreneur Justin Sun is facing a lawsuit from the US Securities and Exchange Commission (SEC) over a scheme to pay celebrities to shill Tron’s TRX and BitTorrent (BTT) tokens.
According to a press release from the SEC, the lawsuit specifically revolves around Sun’s use of celebrities to promote tokens on his Tron blockchain without disclosing that they were paid.
At the same time, Sun also allegedly worked to create an appearance of high trading volume in the TRX token by directing his employees to conduct more than 60,000 so-called wash trades across two trading platforms.
Wash trades are trades where the same party acts as both the buyer and the seller, and they are usually made to artificially inflate trading volumes on specific exchanges or for specific tokens.
Airdrops of unregistered securities
The SEC added in its announcement that so-called airdrops and bounty programs that promised payment in tokens constituted “unregistered offers and sales” of securities, in violation of Section 5 of the US Securities Act.
For this, the SEC has now charged Justin Sun with having violated the antifraud and market manipulation provisions of the federal securities laws.
Eight celebrities charged
In addition to Sun and his companies, eight celebrities, including YouTuber Jake Paul and actress Lindsay Lohan, were also charged by the SEC for their role in promoting the tokens without disclosing that they were paid by Sun to do so.
With the exception of DeAndre Cortez Way (also known as Soulja Boy) and Austin Mahone, all of the celebrities charged in the case have agreed to a settlement with the SEC worth a total of more than $400,000.
In a comment, SEC Chair Gary Gensler said the case demonstrates the “high risk investors face when crypto asset securities are offered and sold without proper disclosure,” while adding:
“As alleged, Sun and his companies not only targeted U.S. investors in their unregistered offers and sales, generating millions in illegal proceeds at the expense of investors, but they also coordinated wash trading on an unregistered trading platform to create the misleading appearance of active trading in TRX.”