What do Akon, Jake Paul, Lil Yachty, Lindsay Lohan, Ne-Yo and Soulja Boy have in common?
The U.S. Securities and Exchange Commission on Wednesday announced that they had civilly charged them and two other celebrities with illegally touting cryptocurrencies from companies with ties to San Francisco.
Those charges stemmed from federal regulators charging crypto entrepreneur Justin Sun and three of his companies with fraud and violating securities laws, alleging that they paid the aforementioned celebrities to endorse the aforementioned cryptocurrencies without disclosing that they were paid.
Federal officials also charged Sun, Tron Foundation Limited, BitTorrent Foundation Ltd. — yes, that BitTorrent — and Rainberry Inc. — formerly known as BitTorrent — with failing to register the offers and sales of crypto asset securities and fraudulently manipulating the secondary market for one of those crypto asset securities.
BitTorrent was founded in 2004, and the formerly San Francisco-headquartered company rebranded as Rainberry in 2018 when Sun's Tron Foundation acquired it. Rainberry closed its San Francisco office earlier this year. Tron Foundation has offices in Singapore and San Francisco.
Neither Rainberry nor Tron Foundation responded to The Examiner's request for comment prior to publication on Wednesday afternoon. This story will be updated when we hear back.
Sun allegedly paid eight entertainers to endorse Tronix and BitTorrent — a cryptocurrency named for the peer-to-peer file-sharing service that has long been used to download pirated content of many of the aforementioned entertainers and many others — without disclosing those payments.
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"Sun paid celebrities with millions of social media followers to tout the unregistered offerings, while specifically directing that they not disclose their compensation," Gurbir Gerwal, the director of the SEC's division of enforcement, said in a release on Wednesday. "This is the very conduct that the federal securities laws were designed to protect against regardless of the labels Sun and others used."
Akon, Lil Yachty, Lohan, Ne-Yo, Paul and Michele Mason, a pornographic actress who performs under the name Kendra Lust, agreed to pay a total of more than $400,000 in penalties and fines. They didn't admit guilt or deny the SEC's findings, but they did agree to not endorse or promote crypto asset securities for the next three years.
Paul alone agreed to pay nearly $102,000 in total fines and penalties, while Akon agreed to pay almost $171,000. Sun allegedly gave Paul more than $25,000 in crypto assets and Akon exactly $42,000, by far the most of the entertainers who agreed to pay penalties.
Soulja Boy did not tell 'em he agreed with the findings, as the SEC said that neither he nor singer Austin Mahone had agreed to pay those penalties. The "Crank That" rapper and "What About Love" crooner are named alongside Sun and his companies in the federal complaint filed on Wednesday in the Southern District of New York.
In the complaint, the SEC alleged that Sun and his companies "engaged in hundreds of thousands" of trades of Tronix "between accounts that Sun ultimately controlled," all in an effort to drive up the cryptocurrency's value.
"None of those trades involved any change in beneficial ownership or had any legitimate economic purpose," according to the SEC complaint.
