Betr co-founder and social media sensation Jake Paul is in hot water for using his online following to shill for a cryptocurrency site. The Securities and Exchange Commission (SEC) named Paul along with seven other celebrities in charges related to entrepreneur Justin Sun and his companies Tron Foundation Limited, BitTorrent Foundation, and Rainberry Inc.
Per the complaint, Paul and the other celebrities, which included Lindsay Lohan, Ne-Yo, and Akon among others, failed to disclose they were being financially compensated for social media posts encouraging followers to buy the cryptocurrencies Tronix (TRX) and BitTorrent (BTT).
The complaint is the latest in a series of actions against high-profile celebrities promoting cryptocurrencies, including the class action lawsuit against FTX investors like Tom Brady and Shaquille O’Neal and Kim Kardashian’s $1.26 million fine related to promoting cryptocurrency EthereumMax.
“This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure,” said SEC Chair Gary Gensler. “As alleged, Sun and his companies 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.”
The celebrities named in the complaint, save for Soulja Boy and Austin Mahone, agreed to pay a combined $400,000 in penalties to settle their charges.
“While we’re neutral about the technologies at issue, we’re anything but neutral when it comes to investor protection,” said 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.”
As a licensed stakeholder in Betr in Ohio, Massachusetts, and now Virginia, the issue could be addressed by regulators in the future.