Chinese cryptocurrency entrepreneur Justin Sun was charged with fraud. Several celebrities including Lindsay Lohan and Akon were accused of illegally promoting the currency.
The US Securities and Exchange Commission (SEC) charged Chinese cryptocurrency entrepreneur Justin Sun with fraud Wednesday.
Actor Lindsey Lohan, rapper Akon, Soulja Boy and several other celebrities were also charged in the scheme for illegally promoting Sun's crypto assets.
The 'Wild West' of misconduct
Sun and his companies Tron Foundation, BitTorrent Foundation and Rainberry were accused of scheming to distribute billions of crypto assets known as Tronix (TRX) and BitTorrent (BTT) without registering with the relevant authorities.
Sun was also charged with artificially inflating the trade volume.
The celebrities were charged with concealing the fact that they were paid to promote TRX and BTT on their social media accounts as well as misleading the public into thinking they had an "unbiased interest" in the currency.
The SEC said in their complaint that Sun's activities led to tens of millions of dollars of illegal profit at the expense of other investors.
SEC Chair Gary Gensler said in a statement that "This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure,"
After the collapse of Sam Bankman-Fried's cryptocurrency exchange FTX in November, the SEC has been ratcheting up their efforts to crack down on the crypto industry.
Gensler described the crypto ecosystem as a "Wild West" riddled with misconduct.
A history of paid promotions
Some of the celebrities like Lindsay Lohan, Akon, adult film maker Michele Mason, recording artists Ne-Yo and Lil Yachty and boxer Jake Paul agreed to pay more than $400,000 (€ 367,100) combined, to settle the claims.
Lohan's lawyer, Andre Brettler said that the actor was unaware about the disclosure requirements until last March.
Lohan was asked to give up the $10,000 that she was paid, with interest. She was also charged a fine of $30,000.
In recent years, many celebrities like Reese Witherspoon, Matt Damon, Tom Brady and others have used their massive social media influence to promote cryptocurrencies.
However, it is illegal to do so without the full disclosure of being paid to promote.
Last year, reality TV star Kim Kardashian had to pay a fine of $1 million to settle federal charges after she recommended Ethereum Max tokens, a crypto security, to her millions of Instagram followers.
She did not disclose that she had been paid to promote the currency.
In 2020, actor Steven Seagal paid more than $300,000 as part of a settlement with the SEC. He was banned from promoting investments for three years.