Tron founder Justin Sun sued by US SEC on securities, market manipulation charges
The US Securities and Exchange Commission sued Justin Sun on Wednesday on charges of selling and airdropping unregistered securities, fraud and market manipulation.
The SEC said in a press release that it sued Sun, Tron Foundation, BitTorrent Foundation and BitTorrent (now known as Rainberry) for selling tronix (TRX) and BitTorrent (BTT) tokens, which it described as unregistered crypto-asset securities. The regulator further alleged that the defendants are “fraudulently manipulating[ed]” TRX’s secondary market through a “comprehensive wash trade” scheme.
Sun, who was appointed as Grenada’s ambassador to the World Trade Organization (WTO) last year, tried to artificially inflate TRX’s trading volume through the wash trade scheme, the SEC alleged, by having its own employees “engage in more than 600,000 wash trades of TRX between two trading platform accounts for cryptoassets he controlled.” According to the court filing, Tron Foundation employees executed the trades, BitTorrent and Tron Foundations controlled the accounts, and Rainberry employees transferred funds for the trade.
Tron’s native token TRX fell 10% on the SEC charge. Other tokens related to Justin Sun, including Huobi (HT), Just (JST) and Sun Token (SUN) also fell more than 5% on Wednesday.
The agency is also suing Lindsay Lohan, Jake Paul, Soulja Boy, Lil Yachty, Ne-Yo, Akon and Michele Mason over illegal charges for their roles allegedly promoting TRX and BTT without disclosing they were paid to do so. The majority of these celebrities settled the charges.
According to the filing, while Sun said on social media that paid celebrities were required to disclose that they were paid, “Sun himself arranged the payments to celebrities and knew that those payments were not disclosed.”
Somewhere between 4.5 million and 7.4 million TRX were traded daily through these wash trades, the agency said.
“This scheme required a substantial supply of TRX, which Sun allegedly provided. As alleged, Sun also sold TRX to the secondary market, generating revenues of $31 million from illegal, unregistered offerings and sales of the token,” the SEC said.
In a statement, SEC Chairman Gary Gensler said the case was an example of the potential risk crypto investors can face with unregistered securities.
“As alleged, Sun and his companies not only targeted American investors in their unregistered offers and sales, generating millions in illegal income at the investors’ expense, but they also coordinated the wash trades on an unregistered trading platform to create the misleading appearance of active trading. in TRX ,” he said. “Sun induced additional investors to buy TRX and BTT by orchestrating an advertising campaign in which he and his celebrity promoters concealed the fact that the celebrities were being paid for their tweets.”
Read the full complaint below:
UPDATE (March 22, 2023, 19:50 UTC): Adding details from archiving.
