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Jake Paul and Ne-Yo among stars accused in case as most agree to pay settlement without admission or denial

Wed 22 Mar 2023 21.48 EDT

The Securities and Exchange Commission has filed charges against a handful of celebrities including Lindsay Lohan, Jake Paul and Ne-Yo for violating laws in touting cryptocurrencies.

On Wednesday, the SEC filed the charges against the celebrities as part of its broader charges filed against the crypto entrepreneur Justin Sun and three of his companies: Tron Foundation Ltd, BitTorrent Foundation Ltd, and Rainberry Inc (formerly BitTorrent) for the unregistered offer and sale of the crypto asset securities Tronix (TRX) and BitTorrent (BTT).

The SEC charged eight celebrities, who also included the rappers Soulja Boy and Lil Yachty, the singers Austin Mahone and Akon, and the adult film star Kendra Lust for illegally touting TRX and/or BTT without disclosing that they were compensated for doing so and the amount of their compensation.

According to the SEC, Sun and his companies offered and sold the crypto asset securities as investments through various unregistered bounty programs, which directed interested parties to promote the tokens on social media, join and recruit others to Tron-affiliated Telegram and Discord channels, and create BitTorrent accounts in exchange for TRX and BTT distributions.

This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure, the SEC chair, Gary Gensler, said in a statement.

All mentioned celebrities except for Soulja Boy and Austin Mahone agreed to pay a total of over $400,000 in disgorgement, interest and penalties to settle the charges, without admitting or denying the SECs findings.

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SEC charges celebrities including Lindsay Lohan over cryptocurrency endorsements - The Guardian

The Securities and Exchange Commission (SEC) has issued an alert reminding investors that cryptocurrency offerings may be illegal because they are not registered with the regulator.

The move is in line with the string of regulatory actions brought against numerous crypto platforms since October 2022, when FTX famously imploded. To date, the regulator has gone after Terra, Coinbase, Kraken, Paxos, and Binance, claiming the companies violated investor protection laws or had illegal securities offerings. Just yesterday, the SEC took action against the founder of Tron and celebrities that touted investments in the cryptocurrency.

According to the alert, crypto exchanges may offer a combination of services that are normally offered by separate firms. By offering exchange, broker-dealer and custodial functions, platforms create conflicts of interest that pose a risk to investors.

SEC-registered entities must comply with a number of rules to protect investors. However, according to the regulator, none of the major crypto asset entities is registered with the SEC as a broker-dealer, exchange, or investment adviserso investors may not get the protections afforded by the rules applicable to these entities.

The regulator also addressed proof of reserves, which has been commonly used to show an entity has enough reserves to cover the amount held in customer accounts. This proof assures customers that their funds are safe and available to withdraw on demand.

These types of services may not provide any meaningful assurance that these entities hold adequate assets to back their customers balances.Further, crypto asset entities might use these in lieu of audited financial statements in order to obscure and confuse customers about the safety of their assets, the SEC said.

The alert explains proof of reserves does not provide the same level of assurance as an audit of financial statements. Proof of reserves should not be relied upon by investors to conclude a crypto asset entity has sufficient reserves to cover customer liabilities, according to the SECs statement.

The warning from the SEC is nothing new. It simply puts the legality of crypto investing under a more laser-focused microscope.

According to the SEC's Office of Investor Education and Advocacy, crypto asset securities are still a risky investment. They warn investments in crypto asset securities, in addition to being exceptionally volatile and speculative, may lack important investor protections on platforms where they can buy, sell, borrow, or lend them.

Individual investors who participate in transactions involving crypto assets, including crypto asset securities, may face a significant risk of loss and are urged only to invest what they can afford to lose completelysomething the crypto industry has preached for years.

Read the rest here:

SEC Urges Caution on Crypto Investing - Investopedia

The Securities and Exchanges Commission (SEC) has sent Coinbase a letter warning of possible legal action.

Coinbase on Wednesday (Mar. 22) said it had received a Wells notice from the SEC, which the agency uses to notify a company of a potential lawsuit.Companies can respond, and the agencys commissioners have at least six months to decide any lawsuits or enforcement settlements.

The Wells Notice targets several aspects of Coinbases business, including assets listed on its crypto exchange, its staking service Coinbase Earn and its wallet service. It is the result of a probe that began in mid-2022, before the FTX collapse.

The cryptocurrency exchanges co-founder and CEO Brian Armstrong wrote that the SEC reviewed our business in detail and approved Coinbase to go public two years ago and Coinbase is right on the law and confident in the facts. By setting the ball rolling on a possible lawsuit, the SEC has not been fair, reasonable, or even demonstrated a seriousness of purpose when it comes to its engagement on digital assets, he added.

Coinbase has amassed a massive user base of 110 million over the last decade. If the SEC follows through with a lawsuit, the exchange is planning to use it as an opportunity to clear up the confusion around crypto regulation. Coinbase doesnt list securities, Coinbase chief legal officer Paul Grewal wrote in a blog post.

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More than 90%: Share of assets that have applied to be listed on the platform that Coinbase says it has rejected after a rigorous asset review process.

Millions of dollars: Money Coinbase says it spent on legal support to develop and build two different models for crypto exchanges to register with the SEC. The SEC neither gave feedback on this, nor asked questions about any asset on Coinbases platform, Grewal claims.

More than 30: Times Coinbase met with the SEC over nine months. We were doing all of the talking, Grewal recalled. The agency was meant to provide feedback in a January 2023 meeting, but canceled the day before that was due.

57: Times Coinbases staking services were referred to in the S-1 the SEC reviewed in 2021 before the company went public, which are now part of the Wells notice. But that was also before SEC chief Gary Gensler, who is chasing after crypto crimes, took the helm.

Tell us the rules and we will follow them. Give us an actual path to register, and we will register the parts of our business that need registering. In the meantime, the US cannot afford for regulators to continue to threaten the good actors in the crypto industry for doing the same legal and compliant things theyve always done. This unfair approach will only drive innovation, jobs, and the entire industry overseas. -Coinbases chief legal officer Paul Grewal

Identified a problem that securities laws can solve

Engaged the public

Solicited experts

Described the economic impact from its action

Last month, rival crypto exchange Kraken agreed to stop offering staking services to US customers and pay $30 million in penalties to the SEC as part of a settlement with the agency.

Companies like Coinbase could try to settle if they can limit the damage to their business, Marc Fagel, a former director of the SECs San Francisco office, told the Wall Street Journal. As of now, Coinbase looks ready for a legal fight. If necessary, we welcome the opportunity for Coinbase and the broader crypto community to get clarity in court, Grewal wrote.

While Coinbase shared details about the Wells notice, the SEC launched legal action against crypto entrepreneur Justin Sun. The agency targeted Sun and three of his companies, Tron, BitTorrent, and Rainberry (formerly BitTorrent), over the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT).

As part of that legal action, the SEC also charged eight celebrities, including Lindsay Lohan, Vine-creator-turned-professional-boxer Jake Paul, and singers Ne-Yo and Akon, for illegally touting TRX and/or BTT without disclosing that they were compensated for doing so and the amount of their compensation at Suns behest. Six of the celebrities paid more than $400,000 in disgorgement, interest, and penalties to settle the charges, without admitting or denying the charges.

The SECs civil complaint earlier today is just the latest example of actions it has taken against well known players in the blockchain and crypto space, Sun responded. We believe the complaint lacks merit, and in the meantime will continue building the most decentralized financial system.

For now, even for Coinbase, its business as usual.

The head of the SEC says most cryptocurrencies are operating illegally

The SEC wants public companies to disclose their crypto exposure

Crypto exchanges are desperate to show theyre not the next FTX

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Coinbase is the SEC's next cryptocurrency crackdown target - Quartz

A visual representation of the digital cryptocurrency, XRP.

S3studio | Getty Images

The XRP cryptocurrency soared on Wednesday as investors grew hopeful that Ripple, a company closely associated with the token, would win its prolonged legal battle with the U.S. Securities and Exchange Commission.

The token was worth around 45 cents at about 8 a.m. ET, according to data from CoinGecko, up over 11% in the last 24 hours. It was earlier trading up as much as 20%.

Traders pointed to a supplemental notice submitted by Ripple on Monday which pointed to a ruling in a separate case concerning Binance.US' rescue plan for collapsed crypto lender Voyager Digital. Under the plan, Binance's U.S. unit was to buy all of Voyager's assets, including its native VGX token, in a $1.3 billion deal.

The SEC rejected the plan, arguing VGX was akin to a security and calling Binance an unregistered securities exchange, according to the notice from Ripple.

However, the judge rejected the SEC's objections and approved the bankruptcy plan citing what he called the "vagueness" of the regulator's arguments and stating the SEC had not "offered any guidance at all as to just what it was that the Debtors allegedly were supposed to prove" to demonstrate VGX was not a security, according to the Ripple letter.

The SEC wasn't immediately available for comment when contacted by CNBC.

The SEC accuses Ripple, CEO Brad Garlinghouse and co-founder Chris Larsen of breaching U.S. securities laws by selling XRP without first registering it with the regulator. Ripple contests the SEC's allegations, maintaining the view that XRP should be considered a digital currency rather than a security.

Monica Long, president of Ripple, told CNBC Wednesday morning that she was "very hopeful" about achieving a positive resolution to the SEC battle, adding she thinks it will reach a conclusion sometime this year.

Long said she thinks it's "very unlikely" the judge will rule in favor of the SEC "considering by our view both the facts and the law are on our side."

If XRP were to be deemed a security, it could have huge ramifications for the digital currency industry.

Floods of tokens may end up falling into the same category, making them regulated financial instruments that would need SEC supervision and frequent transparency disclosures.

Ripple and the SEC have now both submitted their final round of briefs seeking a summary judgment to the case. The case now rests with Judge Analisa Torres of the Southern District of New York, who is expected to issue a verdict soon.

It is not clear when she will make her decision. However, some crypto investors believe an outcome will arrive in the coming days.

XRP "is being bolstered by a potential positive outcome in the SEC case," Vijay Ayyar, vice president of international at crpyto exchange Luno, told CNBC via email Wednesday.

The token, which is the sixth-largest globally by market value, is also being boosted by the broader crypto market sentiment, Ayyar said.

Bitcoin is up 70% since the start of the year and is currentlytrading above $28,000for the first time in nine months. Ether, the second-biggest token, has risen 50% year-to-date.

"Overall, crypto markets have rallied in the past week or so, given the anticipationof a pause or slow down in interest rates and theslowdown in inflation," according to Ayyar.

Ripple's Long said she believed the SEC was regulating through enforcement rather than establishing clear regulations for the sector. Europe is more advanced in its treatment of crypto, she argued, highlighting the bloc's Markets in Crypto Assets regulation as an example.

"We're seeing action through enforcement vs. setting clear rules and regulation which is what all of us in the industry desire," Long said.

"Europe is really emerging as a leader in setting really clear regulations and rules that allow crypto companies and also traditional finance to embrace crypto."

For its part, the SEC has said it wants all crypto companies and projects to bring their operations into compliance with federal securities laws.

In an interview with CNBC in February after a crackdown on the crypto exchange Kraken, SEC Chair Gary Gensler said, "There's a handful of tokens that have actually registered. The intermediaries, the storefronts if you wish, the casinos that people are investing in and investing at need to properly comply and disentangle these bundled products."

"If this field has any chance of survival and success, it's time-tested rules and laws to protect the investing public."

In recent weeks, the regulator has taken aim at numerous crypto firms alleging they are engaged in illegal securities offerings.

Stablecoin issuer Paxos said the SEC served it with a notice threatening legal action over claims that BUSD, the native stablecoin of crypto exchange Binance, was a security that should have been registered with the regulator.

The regulator also hit crypto lender Genesis and exchange Gemini with charges alleging a high-yield investment product offered by the two companies should have been treated as a security.

WATCH: Bitcoin at $10,000 or $250,000? Investors are sharply divided on 2023

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XRP cryptocurrency jumps as investors hope Ripple will win legal battle with the SEC - CNBC

The former CEO and co-founder of cryptocurrency company Terraform Labs has been captured in Montenegro, the countrys interior minister said on March 23.

Do Kwon, who is suspected in the loss of investments worth more than $40 billion, was detained at the Podgorica airport with falsified documents, Interior Minister Filip Adzic said.

"Montenegrin police have detained a person suspected of being one of the most wanted fugitives, South Korean citizen Do Kwon, co-founder and CEO of Singapore-based Terraform Labs," Adzic said on Twitter. "We are waiting for official confirmation of identity."

Do Kwon is wanted by the United States, South Korea, and Singapore, Adzic said.

He stands accused of "orchestrating a multi-billion dollar crypto asset securities fraud," according to the U.S. Securities and Exchange Commission (SEC).

"We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for Luna and Terra USD," SEC Chairman Gary Gensler said in a statement in February.

Terra USD was a crypto asset security referred to as an "algorithmic stablecoin" that supposedly maintained its peg to the U.S. dollar by being interchangeable with Luna, another of Kwon's crypto asset securities, the SEC said.

"We also allege that [Terraform and Kwon] committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors," he added.

An arrest warrant was issued by South Korea in September after Terraform Labs and its cryptocurrency crashed in May.

The arrest warrants named several people linked to the Terra USD and Luna cryptocurrencies, the BBC reported.

South Korean prosecutors previously asked Interpol to issue a red notice for Kwon, saying he refused to cooperate with their probe into the crash.

Many investors lost their life savings when Luna and Terra USD collapsed, falling to a value of near zero. The fallout from the collapse of Terraform Labs also affected the wider crypto market.

Read more from the original source:

Authorities In Montenegro Arrest Fugitive Sought In Collapse Of Cryptocurrency - Radio Free Europe / Radio Liberty