Crypto entrepreneur and celebrities face SEC charges for fraud and illegal promotion of crypto

Justin Sun and his three fully-owned companies: Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc. (formerly known as BitTorrent) are facing charges from the SEC for selling crypto assets Tronix (TRX) and BitTorrent (BTT) without registering them as securities as required by law.

The SEC also claims that Sun and his companies cheated by artificially boosting the trading activity of TRX by buying and selling TRX to accounts that they controlled or had influence over, without actually transferring the ownership of TRX to someone else.

Specifically, Sun is being accused of telling his employees to make more than 600,000 fake trades of TRX between two accounts that he owned on crypto asset trading platforms. This made it look like between 4.5 million and 7.4 million TRX were traded every day. This is a form of market manipulation called wash trading. It’s illegal because it deceives other investors and traders about the true supply and demand of TRX. This trick needed a lot of TRX, which Sun gave them.

The SEC also says that Sun sold TRX to other people in the market and made $31 million from it. He did this without following the law and registering the token as a security.

Sun also allegedly paid celebrities with lots of followers to endorse TRX and BTT. Sun also allegedly directed them to not to disclose the fact that they received payment for promoting the cryptocurrency. 

The SEC charged the following celebrities for unlawfully endorsing TRX and/or BTT without telling people that they received money for doing so and how much money they received: Lindsay Lohan, Jake Paul, DeAndre Cortez Way (Soulja Boy), Austin Mahone, Michele Mason (Kendra Lust), Miles Parks McCollum (Lil Yachty), Shaffer Smith (Ne-Yo), and Aliaune Thiam (Akon). 

All but Cortez Way and Mahone settled and agreed to pay back more than $400,000 in total for the money they made, the interest they earned, and the penalties they owed.