Lindsay Lohan, Jake Paul and Soulja Boy among celebrities being sued over crypto sales

Lindsay Lohan

YouTube celebrity Jake Paul. Photo: AP Photo/Ashley Landis.

thumbnail: Lindsay Lohan
thumbnail: YouTube celebrity Jake Paul. Photo: AP Photo/Ashley Landis.
Chris Prentice and Jonathan Stempel

The US Securities and Exchange Commission (SEC) is suing Chinese cryptocurrency entrepreneur Justin Sun, accusing him and other defendants of illegally selling crypto securities and scheming to artificially inflate trading volume in crypto assets.

The agency also charged eight celebrities, including actress Lindsay Lohan and boxer Jake Paul, for illegally touting those assets without disclosing they were being compensated for it.

The other celebrities charged were musician Soulja Boy (DeAndre Cortez Way), singer Austin Mahone, porn actress Kendra Lust (Michele Mason), rapper Lil Yachty (Miles Parks McCollum), musician Ne-Yo (Shaffer Smith) and singer Akon (Aliaune Thiam).

Beginning around August 2017, Sun and his companies Tron Foundation Limited, BitTorrent Foundation Limited and Rainberry Inc, engaged in a scheme to distribute billions of crypto assets known as Tronix (TRX) and BitTorrent (BTT), the SEC said.

That included the use of "bounty programmes" directing interested parties to promote the tokens on social media, including to US-based investors, the SEC said.

TRX and BTT were sold as securities, and thus their sale needed to be registered with the SEC, the regulator said in its complaint filed in Manhattan federal court.

Sun also violated laws against fraud and market manipulation by orchestrating a scheme to inflate apparent trading volume in TRX in the secondary market through wash trading, the SEC said.

From at least April 2018 to February 2019, he allegedly directed employees to engage in over 600,000 wash trades of TRX between two accounts he controlled. This garnered proceeds of $31m from illegal, unregistered offers and sales of the tokens, the SEC said.

All but Cortez Way and Mahone agreed to pay a total of more than $400,00 in disgorgement, penalties and interest to settle the charges, without admitting or denying the SEC's findings.

Lawyers for the celebrities and Rainberry did not respond immediately to requests for comment. A lawyer for Sun could not immediately be identified.