A Chinese entrepreneur has been accused of fraud and numerous celebrities, including Lindsay Lohan and Jake Paul, have been charged with illegally marketing his cryptocurrency.
On Wednesday, the United States Securities and Exchange Commission (SEC) announced that it had charged Tronix (TRX) and BitTorrent (BTT) founder Justin Sun with fraud for misrepresenting trade volume and hiding payments to celebrities in order to promote the coins.
SEC’s lawsuit alleges that Tron Foundation, BitTorrent Foundation, and Rainberry are all owned by the same person and that Sun ordered his employees to buy and sell hundreds of thousands of TRX and BTT at the same time, with no actual transfer of ownership.
According to the SEC, Sun’s efforts to give the impression of legitimate trading made it simpler to sell TRX while keeping prices consistent, allowing Sun to illegally benefit by the tens of millions of dollars at the expense of investors.
“This complaint highlights again the tremendous risk investors face when crypto asset securities are offered and sold without sufficient disclosure,” stated SEC Chair Gary Gensler.
There are allegations that Lohan, Paul, the rapper Akon, the musicians Ne-Yo and Lil Yachty, and the adult actress Michele Mason all encouraged their millions of online fans to invest in cryptocurrencies without disclosing that they had been compensated to do so.
As part of the settlement, the SEC reports that the six individuals have collectively agreed to pay in excess of $400,000 in disgorgement, interest, and penalties.
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The SEC claimed that rapper Soulja Boy and pop singer Austin Mahone, who was also listed in the complaint, did not negotiate a settlement with the commission.
In place of criminal charges, the SEC imposes civil penalties such as fines instead. Since the shocking failure of FTX and the subsequent arrest of its inventor, Sam Bankman-Fried, on fraud charges, US regulators have increased their scrutiny of cryptocurrency markets.
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