SEC Sues Tron Founder Justin Sun On Securities And Market Manipulation

On Wednesday, the U.S. Securities and Exchange Commission brought a lawsuit against Justin Sun, accusing him of engaging in fraudulent activities and market manipulation by selling and airdropping unregistered securities. The lawsuit also named the Tron Foundation, BitTorrent Foundation, and BitTorrent (now known as Rainberry) in relation to the sale of tronix (TRX) and BitTorrent (BTT) tokens, which the SEC alleged were unregistered crypto asset securities.

The regulator claimed that the defendants manipulated TRX's secondary market through a wash trading scheme, wherein Sun's employees conducted over 600,000 wash trades of TRX between two crypto asset trading platform accounts he controlled. The Tron and BitTorrent foundations controlled the accounts, while Rainberry employees transferred funds for the trading. Sun, who was appointed as Grenada's ambassador to the World Trade Organization (WTO) last year, was accused of artificially inflating TRX's trading volume through this scheme.

The court filing revealed that Justin Sun, despite stating on social media that paid celebrities were obligated to disclose their compensation, actually arranged the payments himself and knew that they were not disclosed. The SEC alleged that between 4.5 million and 7.4 million TRX was traded daily through the wash trades facilitated by this scheme. This required a significant supply of TRX, which Sun allegedly provided. As a result of illegal, unregistered offers and sales of the token, Sun reportedly generated proceeds of $31 million from selling TRX into the secondary market.

In response to the lawsuit, SEC Chair Gary Gensler stated that the case illustrated the potential risks crypto investors may encounter with unregistered securities. He further alleged that Sun and his companies targeted U.S. investors in their unregistered offers and sales, profiting millions at the expense of investors, and coordinated wash trading on an unregistered trading platform to create the misleading impression of active TRX trading.

Gensler also accused Sun of orchestrating a promotional campaign where he and his celebrity promoters concealed the fact that the celebrities were paid for their tweets, which encouraged investors to purchase TRX and BTT.

You can read the full court filing here: https://www.docdroid.net/owTRUU3/justin-pdf

As a result of the SEC charges against Justin Sun, Tron's native token TRX decreased by 13%. Other tokens associated with Sun, such as Huobi (HT), Just (JST), and Sun Token (SUN), also experienced declines of over 5% on Wednesday.