The SEC Goes After Sun And Friends In Lawsuit

The United States Securities and Exchange Commission (SEC) has filed a lawsuit against Justin Sun, founder of the Tron Foundation, and others for allegedly violating Section 5 of the Securities Act. Sun, the Tron Foundation, the BitTorrent Foundation, and BitTorrent (now known as Rainberry) are accused of selling and distributing unregistered securities through the TRX and BTT tokens and manipulating the markets through wash trading schemes.

The SEC also charged several celebrities, including actress and singer Lindsay Lohan, influencer and boxer Jake Paul, influencer Michele Mason, and rappers and singers Soulja Boy, Lil Yachty, Ne-Yo, and Akon, for promoting TRX and BTT without disclosing that they were paid to do so. Most of these celebrities have agreed to pay over $400,000 in fines and restitution to settle the charges.

The SEC lawsuit alleges that from April 2018 to February 2019, Justin Sun attempted to artificially inflate the trading volume of TRX through wash trading schemes and made Tron Foundation employees participate in over 600,000 illegal trades. Sun is also accused of selling much of his TRX tokens on the secondary market and generating $31 million from illegal, unregistered sales of the token.

SEC Chairman Gary Gensler stated that Sun influenced investors to purchase TRX and BTT through deceptive promotional campaigns that involved the participation of public figures who did not disclose that they were paid for their collaboration. Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, added that the SEC will not allow Sun to get away with violating registration and disclosure requirements and then manipulating the market for those securities.

Following the SEC announcement, several tokens linked to Justin Sun, including TRX, HT, JST, and SUN, experienced a sharp drop in price, reflecting investor dissatisfaction with the regulators’ statements. TRX saw a 15% decrease in less than two hours, from $0.06720 to $0.056.

In response to the allegations, Justin Sun stated that they lack merit and are part of the US regulators’ attempts to blast the cryptocurrency industry.

The SEC’s lawsuit against Justin Sun and others highlights the growing concern over the lack of regulation in the cryptocurrency industry. The case serves as a warning to other cryptocurrency founders and companies to ensure that they comply with securities laws and regulations. The outcome of this case could have far-reaching consequences for the cryptocurrency industry as a whole and could lead to increased regulation and scrutiny.

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