SEC Sues Justin Sun and his Companies for Fraud and Securities Violations

In a press release on Wednesday, March 22^nd, SEC announced charges against Justin Sun and his three companies, Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc., for the unregistered sale of crypto securities TRX and BTT.

Today we charged crypto entrepreneur Justin Sun and three of his wholly-owned companies for the unregistered offer and sale of crypto asset securities Tronix and BitTorrent.

Read more:https://t.co/4tXgKNof6Q

— U.S. Securities and Exchange Commission (@SECGov) March 22, 2023

Celebrities Also Come under SEC Radar

According to an SEC complaint filed in the US District Court for the Southern District of New York, from August 2017, Sun and his companies offered and sold TRX and BTT as securities but never registered and filed for registration with the SEC.

Sued entities sold TRX and BTT through unregistered bounty programs, which directed interested parties to promote tokens in exchange for these tokens and through monthly airdrops.

The securities regulator also alleges that the defendants fraudulently manipulated the secondary market through wash trading of TRX “to create the artificial appearance of legitimate investor interest and keep TRX’s price afloat.” The press release notes:

“From at least April 2018 through February 2019, Sun allegedly directed his employees to engage in more than 600,000 wash trades of TRX between two crypto asset trading platform accounts he controlled, with between 4.5 million and 7.4 million TRX wash traded daily. This scheme required a significant supply of TRX, which Sun allegedly provided. As alleged, Sun also sold TRX into the secondary market, generating proceeds of $31 million from illegal, unregistered offers and sales of the token.”

The SEC has also charged eight celebrities for promoting TRX and BTT without disclosing their compensation. These celebrities included social media influencer Jake Paul, actress Lindsay Lohan, Michele Mason (Kendra Lust), Musicians DeAndre Way, Miles McCollum, Aliaune Thiam, Shaffer Smith, and Austin Mahone.

According to the complaint, their campaigns misled the public into believing that these celebrities had an unbiased interest in TRX and BTT, and were not merely paid spokespersons. SIX celebrities, except for DeAndre Way and Austin Mahone, have agreed to pay more than $400,000 to settle the charges without admitting or denying the findings.

Justin Sun Reacts

In his Tweet, Justin Sun, the always controversial figure behind the Tron ecosystem, said that the SEC complaint lacked merit and its regulatory framework for crypto was still in its infancy.

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

— H.E. Justin Sun 孙宇晨 (@justinsuntron) March 23, 2023

He stated:

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

He highlighted the recent adoption of TRX and BTT as legal tender in the Caribbean island nation Dominica to urge regulatory collaboration between governments and crypto players.

Both TRX and BTT felt the heat of SEC action. TRX has been more than 7% down in the last 24 hours. BTT has also fallen nearly 5% in the last 24 hours