The U.S. Securities and Exchange Commission has taken legal action against Justin Sun, the founder of Tron, on allegations of selling and distributing unregistered securities, fraud, and market manipulation. The charges were made public in a press release on Wednesday.
The lawsuit stems from Sun’s involvement in the unregistered offer and sale of two crypto asset securities known as “TRX” and “BTT.” Sun allegedly worked through several companies that he owns and controls, including Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry, Inc., to distribute billions of TRX and BTT to the public and create active secondary markets for trading them.
Despite engaging in widespread public offers and sales of TRX and BTT, neither Sun nor his entities ever filed a registration statement with the SEC, and no exemption from registration was available. Additionally, Sun allegedly directed manipulative wash trading of TRX to create the appearance of legitimate investor interest and maintain its price.
To generate public interest in TRX and BTT, the Sun Defendants paid celebrities, including Austin Mahone, DeAndre Cortez Way, and others, to promote or tout the crypto assets on their social media accounts, which had millions of followers. The SEC claims that these touts did not disclose that the celebrities had been paid, misleading the public into believing that they had an unbiased interest in TRX and BTT.
Sun also allegedly made false statements about the touting campaign, stating on social media that paid celebrities were required to disclose their payments when he himself arranged the payments and knew that they were not being disclosed.
The SEC charges the Sun Defendants with violating registration and anti-fraud provisions of the Securities Act of 1933 and anti-manipulation and anti-fraud provisions of the Securities and Exchange Act of 1934. Mahone and Way are also charged with violating the anti-touting provision of the Securities Act.
Following the news of the charges, Tron’s native token TRX fell over 10%, trading at around 0.06 at press time. Other tokens related to Justin Sun, including Huobi (HT), Just (JST), and Sun Token (SUN), also fell more than 5% on Wednesday.
In addition to Sun, the SEC is suing Lindsay Lohan, Jake Paul, Soulja Boy, Lil Yachty, Ne-Yo, Akon, and Michele Mason on illegal touting charges for allegedly promoting TRX and BTT without disclosing that they were paid to do so. Most of these celebrities have settled the charges.
The SEC has indicated that if the Sun Defendants are not restrained and enjoined, they will continue to violate federal securities laws.
Read more:
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- Justin Sun Injects $100 Million Into Huobi’s Liquidity Fund
- Justin Sun Proposes $1.5 Billion Acquisition Of Credit Suisse