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- Tron’s Justin Sun has been sued by the US Securities and Exchange Commission for selling unregistered securities and engaging in wash trading.
- The court document alleges that Sun paid celebrities to mislead the public by promoting TRX and BIT without disclosing they have been paid to do so.
Justin Sun, one of the prominent figures in the crypto industry and the founder of Tron Foundation has become the latest target of the US Securities and Exchange Commission as part of its effort to bring sanity into the crypto sphere. While the law enforcement move by the Agency to control the industry keeps getting criticized, SEC continues to bring the operation of the crypto-space to the control of its laws.
In a press release, SEC stated that it is suing Sun, the Tron Foundation, the BitTorrent Foundation, and BitTorrent (now known as Rainberry). According to SEC, Sun and the firms have allegedly sold Tron (TRX) and BitTorrent (BTT) tokens which are considered unregistered crypto asset securities. In addition, Sun is accused of fraudulently manipulating TRX’s secondary market using an extensive wash trading scheme.
By his instructions, his employees engaged in over 600,000 wash trades of TRX between two crypto trading platform accounts he controls. The idea was to artificially inflate the trading volume of TRX. The court filing further alleges that the Tron Foundation employees facilitated the trades, and the BitTorrent and Tron foundations also controlled the accounts. While this was being done, the Rainberry employees were in charge of transferring funds for the trade.
SEC alleges that between 4.5 million and 7.4 million TRX was traded daily through the wash trade scheme. It is also stated that about $31 million in proceeds were generated from the illegal, unregistered offers and sales of the token.
Sun paid celebrities to promote TRX and BIT – SEC
According to the court document, the Tron founder made payments to celebrities to promote TRX and BIT to their millions of social media followers without disclosing that they are running paid promotions. Their touts misled the public to believe that they merely had an unbiased interest in the assets.
As alleged, Sun and his companies not only targeted U.S. investors in their unregistered offers and sales, generating millions in illegal proceeds at the expense of investors, but they also coordinated wash trading on an unregistered trading platform to create the misleading appearance of active trading in TRX. Sun further induced investors to purchase TRX and BTT by orchestrating a promotional campaign in which he and his celebrity promoters hid the fact that the celebrities were paid for their tweets.
SEC is said to be suing these celebrities including Lindsay Lohan, Jake Paul, Soulja Boy, Lil Yachty, Ne-Yo, Akon, and Michele Mason on charges of illegal touting to promote TRX and BIT without disclosing they were paid to do that. According to reports, some of the celebrities have already settled the charges.
SEC chair Gary Gensler has stated that this case is a good example of how crypto investors may face potential risks with unregistered securities.
Recently, Pro-Ripple attorney and founder of CryptoLaw John Deaton disclosed that the crypto attacks are politically and economically motivated. According to him, crypto regulation may not be established until maybe late 2025. For this reason, crypto retail holders, investors, and all stakeholders must fight back by seeking clarity in court.
Following the lawsuit, Tron (TRX) has fallen by seven percent in the last 24 hours to trade at $0.062294.
