Crypto Entrepreneur and Celebrity Promoters Face S.E.C. Charges

The Securities and Trade Fee introduced costs on Wednesday in opposition to a outstanding cryptocurrency entrepreneur and a gaggle of celebrities who promoted his ventures, together with the actress Lindsay Lohan.

The S.E.C. filed a grievance in federal courtroom within the Southern District of New York charging the entrepreneur, Justin Solar, with securities regulation violations linked to his administration of three crypto firms. The company additionally charged eight celebrities, together with Ms. Lohan and the social media influencer Jake Paul, with illegally selling Mr. Solar’s cryptocurrencies.

Ms. Lohan, Mr. Paul and 4 of the opposite celebrities agreed to pay a complete of $400,000 to settle the fees.

The S.E.C. costs are the most recent in a sequence of federal enforcement efforts concentrating on the crypto business, which has confronted mounting scrutiny within the practically 5 months because the implosion of FTX, the trade based by Sam Bankman-Fried.

Up to now this yr, the S.E.C. has levied fines and penalties in opposition to crypto lending companies and settled a case with Kraken, one of many largest American crypto exchanges. On the similar time, federal banking regulators have expressed rising skepticism about crypto, elevating the strain on a freewheeling business after a procession of bankruptcies and market meltdowns over the past yr.

On Wednesday, the crypto trade Coinbase introduced that it had obtained a so-called Wells discover from the S.E.C., warning that the company was planning on bringing an enforcement motion in opposition to the corporate.

“We’re assured within the legality of our property and providers, and if wanted, we welcome a authorized course of to supply the readability we’ve got been advocating for,” the corporate mentioned in a press release.

A longtime crypto investor, Mr. Solar, 32, has lately tried to model himself as a form of crypto diplomat, working to encourage the adoption of digital property the world over. He has served as Grenada’s consultant to the World Commerce Group, and he refers to himself as “His Excellency” on social media.

However based on the S.E.C.’s grievance, his firms — Tron Basis, BitTorrent Basis and Rainberry — supplied cryptocurrencies that weren’t correctly registered. Mr. Solar additionally engaged in manipulative buying and selling practices that created the unreal look that his digital currencies have been attracting robust investor curiosity, the grievance mentioned.

A consultant for Mr. Solar didn’t instantly reply to a request for remark.

In keeping with the S.E.C., Mr. Solar drummed up curiosity in his crypto tasks — which included the digital cash TRX and BTT — by recruiting superstar endorsers.

“Though the celebrities have been paid to advertise TRX and BTT, their touts on social media didn’t disclose that that they had been paid or the quantities of their funds,” the grievance mentioned. “The general public was misled into believing that these celebrities had unbiased curiosity in TRX and BTT, and weren’t merely paid spokespersons.”

In February 2021, Ms. Lohan promoted TRX on Twitter in trade for a $10,000 cost, the S.E.C. mentioned. “Tremendous quick and 0 payment,” she wrote. “Good job @justinsuntron.” By an middleman, Tron had offered Ms. Lohan with the tweet’s language, based on the S.E.C.

Along with her and Mr. Paul, the S.E.C. charged DeAndre Cortez Method, the rapper extra generally often called Soulja Boy; Austin Mahone, a singer and songwriter; Michele Anne Mason, a movie director and web persona often called Kendra Lust; Miles Parks McCollum, the rapper often called Lil Yachty; Shaffer Smith, a performer who goes by Ne-Yo; and Aliaune Thiam, an entertainer often called Akon. All besides Mr. Method and Mr. Mahone settled their costs.

Below federal regulation, individuals who endorse securities are required to reveal whether or not they obtained compensation for the promotion, and to specify the quantity. A number of different celebrities, together with Kim Kardashian, have additionally confronted S.E.C. fines for his or her promotion of crypto investments.