The Securities and Exchange Commission has charged Justin Sun, who is a Chinese-born diplomat, best known as the founder of Tron which is a blockchain DAO ecosystem, with fraud and unregistered securities charges.
The agency has also filed charges not just against Justin Sun, but also against three of his companies which are, Tron Foundation Ltd, BitTorrent Foundation Ltd, and Rainberry Inc for the unregistered sale and offering of crypto asset securities Tronix (TRX) and BitTorrent (BTT).
The two tokes TRX and BTT that were sold by Justin Sun’s companies were recognized as unregistered crypto assets by the Securities and Exchange Commission.
Justin Sun and his companies offered and sold both the unregistered tokens TRX and BTT. The companies were required to register the offer and sales of these tokens with the SEC but the companies failed in doing so.
The Securities and Exchange Commission also filed charges against some of the popular celebrities as a part of the broader charges filed against Justin Sun and his three companies. The celebrities that became a part of the case include popular names such as Lindsay Lohan, Jake Paul, and Ne-Yo. They were charged with violating the laws in touting cryptocurrencies.
Along with the mentioned celebrities, other popular figures such as rappers Souljia Boy, and Lil Yachty, singers like Austin Mahone and Akon, and also adult film star Kendra Lust are also charged by the SEC.
The charge against them is for illegally touting TRX and/or BTT without revealing the fact that they were compensated by the company for doing so and also for not revealing the amount that they received as compensation.
As per the statements from the Securities and Exchange Commission Gary Gensler, Justin Sun and his company sold crypto assets securities as investments through different bounty programs that were unregistered.
These bounty programs prompted people who were interested in the scheme to promote tokens through different social media platforms.
Through such promotion works, people could join and also recruit other people who were interested in Tron-affiliated Telegram and Discord channels and also provide the opportunity to create BitTorrent accounts to receive TRX and BTT.
According to the chairman of the Securities and Exchange Commission, the case is a perfect example of the risk factors that investors are prone to if crypto securities are offered and sold without proper disclosure.
Apart from two celebrities, Souljia Boy and Austin Mahone, all other celebrities who are charged by the SEC have agreed to pay a total of $400,000 to settle the penalties and also as interest and in disgorgement. They also have neither accepted nor denied the findings by the SEC.
The SEC also expanded on the other charges committed by Justin Sun and his companies.
Apart from targeting investors from the United States for their unregistered sales and offers and thereby generating millions through illegal processes, the companies also arranged wash trading on an unregistered platform which gave the wrong impression of active trading in TRX.
Justin Sun also followed this process by including celebrities and promoting these tokens through their social media handles and also hiding the actual fact that these celebrities were paid for their tweets and posts in support of the program.
None of the celebrities who had been charged with the case has released an official response and also has not responded to any questions from the media. Recently, many celebrities have been active in the field of cryptocurrency owing to their growing popularity among people.
But as the authorities and other regulating agencies are skeptical about the crypto market and its safety, many celebrities have also faced some backlash for their involvement.
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Last year in October, popular celebrity Kim Kardashian also found herself in trouble in a similar incident. She also made the same mistake in using her popular Instagram account to tout a cryptocurrency.
What landed the celebrity in trouble was hiding the fact that she was actually paid for the service and promotion that she offered through her social media handle.
Also, following similar incidents in the recent past, the SEC and other similar regulatory agencies have expressed their concerns regarding the safety and guarantee of crypto assets and their operations.
The agency had been a strong advocate of implementing new restrictions and regulations in crypto trading in the United States to protect the investor’s interest and save them from a potential loss.
While the agencies argue for more control and restriction, many crypto firms are against these arguments.
They believe that implementing new rules and regulations in crypto trading will reduce the innovation and interest that attract people to crypto markets and thereby reduce the growth in the field. Many popular figures like the CEO of CoinBase, Armstrong have raised their opinions against new restrictions on crypto trading.
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