According to a statement dated March 22nd, the Securities and Exchange Commission (SEC) has sued TRON founder and former CEO Justin Sun and his affiliates.
SEC Sues TRON Founder Justin Sun Over TRX and BTT
The SEC alleges that Sun’s sale of two cryptocurrency tokens — TRON (TRX) and BitTorrent (BTT) — constitutes an unregistered securities offering. In an attached file, the regulator said Sun and his affiliates had made a broad public offering for these tokens but had not filed a registration statement. The regulator also noted that organizers were not granted regulatory exemptions.
The SEC further alleges that Sun and his companies were fraudulently involved through wash trading to create the appearance of genuine demand and keep the value of the token high. According to the SEC, the three Sun-controlled companies regularly moved their tokens around without actually changing their substantive ownership.
These parties reportedly traded between 4.5 million and 7.4 million TRX daily from April 2018 to February 2019 and executed over 600,000 total wash trades. Sun also allegedly made $31 million from the illegal sale of tokens on the secondary market. The SEC has identified three Sun’s companies involved in sales and wash trading programs. These companies are the Tron Foundation, BitTorrent Foundation, and Rainberry Inc. Rainberry Inc. was formerly known as BitTorrent, Inc.
The SEC also alleges that various celebrities promoted BTT and TRX on social media, but did not disclose that Sun and his companies paid them. In 2021, the question was raised whether these celebrities were being compensated for their endorsements. The regulator has named a number of celebrities involved in the promotion, including actress Lindsay Lohan, online influencer and former boxer Jake Paul, adult performer Kenda Lust , as well as musical artists Austin Mahone, Lil Yachty, Soulja Boy, Akon, and Ne-Yo.
All but two of these celebrities agreed to pay fines and penalties of over $400,000. They are not required to admit or deny the SEC’s findings. Austin Mahone and Soulja boy opposed the settlement and were named as defendants. According to the SEC’s latest filing, the two will continue to violate the anti-propaganda provisions of of securities law “unless restrained and enjoined.”
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