The Securities and Exchange Commission today announced charges against crypto asset entrepreneur Justin Sun and three of his wholly-owned companies, Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc. (formerly BitTorrent), for the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT).
The SEC also charged Sun and his companies with fraudulently manipulating the secondary market for TRX through extensive wash trading, which involves the simultaneous or near-simultaneous purchase and sale of a security to make it appear actively traded without an actual change in beneficial ownership, and for orchestrating a scheme to pay celebrities to tout TRX and BTT without disclosing their compensation.
The SEC’s complaint, filed in U.S. District Court for the Southern District of New York, alleges that Sun and his companies offered and sold TRX and BTT as investments through multiple unregistered “bounty programs,” which directed interested parties to promote the tokens on social media, join and recruit others to Tron-affiliated Telegram and Discord channels, and create BitTorrent accounts in exchange for TRX and BTT distributions.
The complaint further alleges that Sun, BitTorrent Foundation, and Rainberry offered and sold BTT in unregistered monthly airdrops to investors, including in the United States, who purchased and held TRX in Tron wallets or on participating crypto asset trading platforms. According to the complaint, each of these unregistered offers and sales violated Section 5 of the Securities Act.
The Commission also alleges that Sun violated the antifraud and market manipulation provisions of the federal securities laws by orchestrating a scheme to artificially inflate the apparent trading volume of TRX in the secondary market.
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.
Tron’s price dived 12% on the news. Neither Justin Sun nor the Tron foundation have made any public comments on this breaking announcement.
SEC also charged a number of celebrities, like Jake Paul and Lindsay Lohan, “for illegally touting TRX and/or BTT without disclosing that they were compensated for doing so and the amount of their compensation.”
Bitcoin dipped as well just prior to the news coming out with it unclear whether it is related as the market more widely has fallen following yet another hike by the Fed.
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- Source: https://www.trustnodes.com/2023/03/22/sec-charge-trons-justin-sun
