Kendra Lust Among Celebs Charged by SEC in Crypto Fraud Case

WASHINGTON, D.C.—The Securities and Exchange Commission on Wednesday announced that it filed charges against crypto asset entrepreneur Justin Sun, along with eight celebrities including adult star Kendra Lust, in a case involving fraud and other illegal practices in the trading of crypto asset securities Tronix (TRX) and BitTorrent (BTT).  The charges against Sun include the unregistered offer and sale of TRX and BTT, fraudulently manipulating the secondary market for TRX through extensive wash trading—a practice involving the simultaneous or near-simultaneous purchase and sale of a security to make it appear actively traded without any actual change in ownership—and orchestrating a scheme with the charged celebrities to "boost" the two crypto tokens without properly disclosing that they received payment to endorse them. Lust and the other entertainers named in the complaint, which was filed in the U.S. District Court for the Southern District of New York, were specifically charged with "illegally touting TRX and/or BTT without disclosing that they were compensated for doing so and the amount of their compensation." Charged alongside Lust were actress Lindsay Lohan, social media star/boxer Jake Paul, and musical artists Soulja Boy, Lil Yachty, Austin Mahone, Ne-Yo and Akon. With the exception of Soulja Boy and Mahone, the remaining six celebrities agreed to pay a total of more than $400,000 to settle the charges, without admitting or denying the SEC's findings. Lust told AVN, "I wasn't aware until the SEC began its investigation of how the law regulates touting. I would never intentionally deceive or try to harm anyone in any way." “This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure,” SEC Chair Gary Gensler said. “As alleged, Sun and his companies [Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc.] not only targeted U.S. investors in their unregistered offers and sales, generating millions in illegal proceeds at the expense of investors, but they also coordinated wash trading on an unregistered trading platform to create the misleading appearance of active trading in TRX. Sun further induced investors to purchase TRX and BTT by orchestrating a promotional campaign in which he and his celebrity promoters hid the fact that the celebrities were paid for their tweets.” “While we’re neutral about the technologies at issue, we’re anything but neutral when it comes to investor protection,” added Gurbir S. Grewal, director of the SEC’s Division of Enforcement. “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. At the same time, Sun paid celebrities with millions of social media followers to tout the unregistered offerings, while specifically directing that they not disclose their compensation. This is the very conduct that the federal securities laws were designed to protect against regardless of the labels Sun and others used.”