SEC Sues Tron Founder, Lindsay Lohan and Other Celebrities Over Crypto Promotion

The U.S. Securities and Exchange Commission (SEC) filed another lawsuit against cryptocurrency promoters, this time including Tron Founder Justin Sun, actress Lindsay Lohan, and Youtuber-turned-boxer Jake Paul.

The SEC's complaint, filed in the U.S. District Court for the Southern District of New York, charged Sun and three of his firms with "the unregistered offer and sale of crypto asset securities." The SEC also accused the crypto entrepreneur of manipulating the secondary market through wash trading.

Wash Trading is when a person buys and sells a security in order to mislead the market. In this case, the SEC alleged that Sun oversaw efforts to make the Tronix (TRX) and BitTorrent (BTT) coins appear to have higher trading volumes.

In the SEC press release, the regulator also charged eight celebrities, including Lindsay Lohan, Akon, Lil Yachty, and Jake Paul. Justin Sun was said to have paid the celebrities for "illegally touting TRX and/or BTT," while failing to disclose they were being paid to do so. Six of eight celebrities settled regulatory claims for promoting crypto assets without saying they earned money for the work.

“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," SEC Chair Gary Gensler said in a statement. "Sun further induced investors to purchase TRX and BTT by orchestrating a promotional campaign in which he and his celebrity promoters hid the fact that the celebrities were paid for their tweets.”

This case mirrors a previous action against celebrity Kim Kardashian who was accused of touting the EthereumMAX token. Kardashian settled with the SEC for $1.26 million in October 2022.

Regulators said the scheme violated the anti-fraud and market manipulation sections of the federal securities laws. Sun's firms were accused of engaging in "more than 600,000 wash trades of TRX," while monthly airdrops of the BTT token were unregistered securities sales which violated Section 5 of the Securities Act.

The case against Sun reignites arguments also found in the long-running SEC v. Ripple case, in which executives were accused of selling the XRP token in unregistered sales. The Ripple case has implications for the entire sector: Gensler has said most cryptocurrencies are securities and should fall under the SEC's jurisdiction—a claim many cryptocurrency companies dispute.

“This case demonstrates again the high-risk investors face when crypto asset securities are offered and sold without proper disclosure,” Gensler said of the latest charges against Sun in a release.