Jake Paul charged by SEC over crypto promotion

Jake Paul, the YouTuber-turned-prizefighter, was among several celebrities who agreed to pay a total of $400,000 in disgorgement, interest and penalties to settle charges of touting a crypto asset without disclosing that they were being paid to do so, the Securities and Exchange Commission announced Wednesday.

By settling, Paul did not admit to or deny the charges, the SEC said.

An SEC filing on Wednesday charged eight celebrities including Paul. It cited Paul’s tweet on Feb. 12, 2021, in which he promoted Tronix (TRX) tokens. The tokens are securities publicly offered by Tron Foundation Limited, which the filing indicated is owned by Yuchen “Justin” Sun, who was tagged in the tweet. The tweet was a reply to one from rapper Lil Yachty, who also was charged, and included a TRX hashtag and a rocket ship emoji.

According to the SEC, Paul’s promotion was in exchange for crypto assets valued at $25,019. Paul had 3.8 million Twitter followers at the time, the filing read. The SEC also cited Section 17(b) of the Securities Act, which states in part that it’s “unlawful for any person to: publish, give publicity to … [a security] for consideration received or to be received.”

The filing indicated that Paul’s tweet came nearly four years after the SEC’s Division of Enforcement and Office of Compliance Inspections and Examinations issued a statement reading “[a]ny celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion. A failure to disclose this information is a violation of anti-touting provisions of the federal securities laws.”

A representative for Paul did not immediately respond to a request for comment.

The SEC also announced charges against Sun and three of his companies “for the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT).” The commission also said in part that Sun and his companies orchestrated “a scheme to pay celebrities to tout TRX and BTT without disclosing their compensation.”

Paul, 26, suffered a split decision loss against Tommy Fury last month, the first defeat of Paul’s boxing career. Paul rose to fame thanks to his content on Vine, a video service that is now defunct, then YouTube, with which he now has more than 20 million followers. In addition to his followings on YouTube and Twitter — now at 4.6 million — he has more than 22 million followers on Instagram.

The SEC announced that six of the eight who were charged — Paul, actress Lindsay Lohan, adult film star Kendra Lust and music artists Lil Yachty, Ne-Yo and Akon – settled. None of them admitted to or denied the charges. The commission also said that rapper Soulja Boy and singer Austin Mahone did not reach a settlement.