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The U.S. Securities and Exchange Commission charged cryptocurrency asset entrepreneur Justin Sun with artificially inflating his companies trading value and selling unregistered assets.

Several celebrities were also charged with civil cryptocurrency violations for illegally accepting payments from Sun to promote his unregistered cryptocurrencies.

In its complaint filed in the U.S. District Court for the Southern District of New York, the SEC said it launched a suit against Suns companies TRON Foundation, BitTorrent Foundation and Rainberry Inc. for selling the unregistered cryptocurrency asset securities Tronix and BitTorrent and engaging in wash trading since 2017.

Wash trading entails an investor buying and selling the same security to manipulate the market and increase trading volume. This practice became illegal under the Commodity Exchange Act in 1936.

As alleged in the complaint, Sun and others used an age-old playbook to mislead and harm investors by first offering securities without complying with registration and disclosure requirements and then manipulating the market for those very securities, Gurbir Grewal, director of the SECs Division of Enforcement, said in a March 22 press release.

The press release also explained that Sun had his employees conduct over 600,000 wash trades of Tronix between the two crypto asset trading platforms he controlled, generating $31 million in proceeds through these sales.

The agency also alleges that Sun paid eight celebrities to post about the cryptocurrency asset securities Tronix and BitTorrent and encourage people to invest, but instructed them to not disclose that they were paid or how much, which is illegal. The list includes: actress Lindsey Lohan; YouTube personality-turned-boxer Jake Paul; musicians Soulja Boy, Austin Mahone, Ne-Yo and Akon; and adult film actress Michele Mason.

These celebrities allegedly used their social media platforms to draw fans to Tron-affiliated Telegram and Discord channels and create BitTorrent accounts in exchange for TRX and BTT distributions, according to a March 24 litigation release.

A representative for Lohan told NBC News that she had been unaware of the disclosure requirement but had agreed to pay a fine to resolve the matter.

Six of the celebrities agreed to settle the charges for illegally touting securities and paid a total sum of $400,000, with the exceptions of Soulja Boy and Mahone. Under the settlement, the celebrities did not need to confirm or deny the SECs allegations.

On the day the SEC announced the lawsuits, the price in TRON fell 13%.

SEC Chair Gary Gensler discussed the takeaways from this case.

This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure, he said in a statement, as reported by NPR.

Additionally, the SEC chair said this case will serve as a reminder for celebrities who promote cryptocurrency assets.

The law requires you to disclose to the public from whom and how much you are getting paid to promote investment in securities, Gensler said, according to Forbes. You cant lie to investors when you tout a security.

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SEC charges celebrities improperly disclosed cryptocurrency ... - The Ticker