Celebrities Settle with SEC Over Failure to Disclose Crypto Promotion Payments

News

Federal regulators said Lindsay Lohan, Akon, recording artists Ne-Yo, and Lil Yachty, boxer and internet personality Jake Paul, and pornstar Kendra Lust, agreed to pay more than US$400,000 to settle charges that they failed to disclose payments they received from a diplomat for promoting cryptocurrencies on social media.

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Reported by

Vinicius Madureira
March 27th, 2023

The payments were allegedly made by a company owned by Justin Sun, representative of Grenade to the World Trade Organization and a crypto asset entrepreneur who is accused of illegally selling crypto asset securities and manipulating the market through so-called ‘wash trading’ - a practice that involves simultaneous purchase and sale of a security to make it appear actively traded without any actual change in ownership.

Sun is followed by over three million people on Twitter where he claimed that the accusations are without merit abd that he intends to continue building the most decentralized financial system anyway.

He also said that “it is no secret that" the regulatory framework for digital assets by the U.S. Securities and Exchange Commission (SEC) is still "in its infancy and is in need of further development."

The SEC claims that the celebrities were told what to say in their social media posts and did not disclose to their millions of followers that they were paid to promote cryptocurrencies for Sun. None admitted or denied the SEC’s findings.

Lohan, who is residing in Dubai and is pregnant, allegedly received $10,000 for a tweet in which she said she was “exploring #DeFi and already liking $JST, $SUN on $TRX.”

“Good job,” she praised Sun.

Lust, on the other hand, received $955 for encouraging people to “use only $TRX cause it’s fast, cheap and hot even PornHub likes it. She thanked Sun.

Lohan’s publicist said the actress was contacted in March 2022, and was unaware of the disclosure requirement. She agreed to pay the fine to resolve the matter, according to the Associated Press. The actress has been ordered to relinquish the $10,000 payment she received along with interest, and pay a $30,000 fine.

Rapper Soulja Boy and pop singer Austin Mahone who were also included in the SEC’s complaint did not come to a settlement with the agency.

According to the SEC’s complaint, Sun made false public statements in order to conceal his celebrity touting campaign and mislead investors. He initially tweeted that his companies were not involved in paying celebrities to promote crypto assets and that he did not know who was behind such activities.

One minute later he tweeted that if any celebrities were paid to promote, they should come forward.

SEC Chair Gary Gensler said that this “demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure.”