Jake Paul Ordered To Pay SEC $100K Over Crypto GamblingSportsbook Founder Failed To Disclose Compensation |
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Sports betting entrepreneur Jake Paul has been hit with a $100,000 order from the SEC for improperly promoting a cryptocurrency.
Paul, a founder of the sportsbook Betr, ran afoul of the law when it came to pushing risky investments in a highly speculative token. According to the federal government, such investing is akin to gambling.
According to the government, On February 12, 2021, Paul—a well-known internet personality and professional boxer—touted on social media a crypto asset security that was being offered and sold. Paul did not disclose that he was being paid to give publicity to the cryptocurrency.
Paul’s failure to disclose this compensation violated a section of the Securities Act, which makes it unlawful for any person to promote a security without fully disclosing the receipt and amount of such compensation from an issuer.
Paul promoted the asset security on Twitter in exchange for a payment of crypto assets valued at approximately $25,019. Paul, at the time of his promotion, had approximately 3.8 million Twitter followers.
Paul put his name behind the cryptocurrency from Tron Foundation Limited, and Tron’s owner and control person Yuchen (Justin) Sun, called “Tronix” tokens (“TRX”). TRX tokens are offered and sold as investment contracts and therefore constitute securities.
From August 2017 to the present, Tron and Sun have engaged in the continuous public offer and sale of TRX tokens. Based on Tron’s and Sun’s offering materials and public statements, purchasers of TRX tokens would have had a reasonable expectation of profits from their investment in the tokens. Tron and Sun explicitly promoted TRX as an investment and touted the potential for significant returns to investors through buying, holding, and trading TRX tokens.
Tron and Sun worked on listing TRX on numerous crypto asset trading platforms, including within the United States and publicly encouraged investors to purchase TRX through the new venues. Tron and Sun routinely touted the market capitalization, price, and trading volume of TRX and published articles advising followers of purportedly opportunistic times to “invest.”
Paul must pay a disgorgement of $25,019, prejudgment interest of $1,811, and a civil money penalty in the amount of $75,057 to the Securities and Exchange Commission.
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