The United States Securities and Exchange Commission (SEC) has charged crypto entrepreneur Justin Sun and three of his companies with engaging in wash trades with the Tronix (TRX) token. Additionally, the securities regulator accused both parties of unregistered offers and sales of TRX and BitTorrent (BTT) tokens.

SEC Slams Charges on Popular Singers and Rappers

In a press statement released on Wednesday, the SEC disclosed that it had brought charges against eight American celebrities for promoting TRX and/or BTT without disclosing that they were paid to do so. In addition, they failed to reveal how much they were paid, the regulator said.

The celebrities include actress and singer Lindsay Lohan, social media influencer and professional boxer, Jake Paul, rapper and record producer, DeAndre ‘Soulja Boy’ Way, singer Austin Mahone, and porn star Michele Mason, popularly known as ‘Kendra Lust’. Other celebrities include rapper and record producer Miles ‘Lil Yachty’ McCollum, singer Shaffer ‘Ne-Yo’ Smith, and singer and entrepreneur, Aliaune ‘Akon’ Thiam.

However, the SEC noted that all the celebrities with the exception of ‘Soulja Boy,’ and Mahone, have agreed to pay a total of over $400,000 to settle the charges without admitting or denying the findings.

SEC Accuses Justin Sun of ‘Extensive Wash Trading’

According to the SEC, in its complaint filed before a district court in New York, it accused Sun of "extensive wash trading" by inflating the trading volume of TRX in the secondary market, thereby contravening antifraud and market manipulation provisions of federal securities laws. Moreover, the regulator accused the TRON founder of making $31 million in illicit profit from the sale of “unregistered” TRX into the secondary market.

“From at least April 2018 through February 2019, Sun allegedly directed his employees to engage in more than 600,000 wash trades of TRX between two crypto asset trading platform accounts he controlled, with between 4.5 million and 7.4 million TRX wash traded daily,” the SEC explained.

In addition, the regulator alleged that Sun and his companies, Tron Foundation Ltd., BitTorrent Foundation Limited and Rainberry Inc., organized several unregistered “bounty programs” where they offered and sold TRX and BRT as investments. On top of that, they held unregistered monthly airdrops where they sold BTT to investors including those residing in the United States.

“This case demonstrates again the high-risk investors face when crypto asset securities are offered and sold without proper disclosure,” Gary Gensler, the SEC Chair, noted in the statement.

Early Reactions

Early reactions from stakeholders in the cryptocurrency industry suggest they are not all taken aback by SEC's action.