The SEC has accused Sun and others of violating aspects of the Securities Act by engaging in manipulative wash trading and enlisting the help of celebrities to drive public interest in the Tron (TRX) and BitTorrent (BTT) tokens
The United States Securities and Exchange Commission (SEC) has taken legal action against Justin Sun, the distinguished founder of Tron, and other associated entities for their purported involvement in various unlawful activities related to crypto asset securities, in a recent development.
The lawsuit, filed in the Southern District of New York, named Sun, the Tron Foundation, the BitTorrent Foundation, and Rainberry over the offer and sale of Tron (TRX) and BitTorrent (BTT), alleging the tokens were securities.
According to the SEC complaint, Sun orchestrated the offer and sale of TRX and BTT, which violated aspects of the Securities Act. The regulator further alleged that Sun engaged in manipulative wash trading, driving public interest in the two tokens by enlisting the help of celebrities.
The SEC claimed that Sun was responsible for more than 600,000 wash trades of TRX from April 2018 to February 2019, which led to Sun selling more than $31 million worth of the token.
To promote TRX and BTT, Sun hired several celebrities, including actress Lindsay Lohan, YouTuber Jake Paul, and singer Akon, who were paid to promote the tokens on social media.
The SEC claimed that these celebrities did not disclose that they had been paid or the amounts of their payments, misleading the public into believing that they had unbiased interest in TRX and BTT and were not merely paid spokespersons. The SEC also alleged that Sun engaged in manipulative trading to increase the value of the tokens, violating securities laws.
In response to the allegations, several celebrities, with the exception of Austin Mahone and Soulja Boy, settled with the SEC, agreeing to pay more than $400,000 in disgorgement, interest, and penalties. The U.S. regulator plans to “permanently prohibit” Sun from acting as an officer or director of any firm offering crypto securities.
This lawsuit follows similar settlements with Kim Kardashian and Paul Pierce, who were also sued by the SEC for promoting crypto tokens on their social media accounts. The SEC chair, Gary Gensler, warned celebrities not to “lie to investors when you tout a security.”
The SEC’s enforcement director, Gurbir Grewal, emphasized that the regulator is “neutral about the technologies at issue,” but is “anything but neutral when it comes to investor protection.”