The Securities and Exchange Commission (SEC) has charged TRON founder Justin Sun and three of his firms, including TRON, BitTorrent, and Rainberry, according to a March 22nd filing.
The charges are related to the unregistered sale and offer of crypto asset securities for TRONIX (TRX) and BitTorrent (BTT) and the fraudulent manipulation of TRX’s secondary market.
Additionally, the SEC alleges that Sun orchestrated an elaborate scheme to pay celebrities for promoting TRX and BTT without disclosing their compensation.
Charges Against Justin Sun & TRON Companies
According to the lawsuit filed in the United States District Court for the Southern District of New York, Sun and his firms promoted and sold TRX and BTT as investments through several unregistered “bounty schemes.”
However, urge the participants to promote TRX and BTT on social media, recruit people to Tron groups, and create BitTorrent accounts. In exchange, they received TRX and BTT distributions.
The lawsuit also claims that Sun, BitTorrent Foundation, and Rainberry marketed and sold BTT in unregistered monthly airdrops to investors, including individuals in the United States who acquired and held TRX in Tron wallets or on participating crypto asset trading platforms.
Fraudulent Market Manipulation & Celebrity Promotion
According to the SEC’s allegations, Sun violated federal securities laws by artificially boosting TRX’s trading volume in the secondary market. The SEC claims that Sun orchestrated this scheme to manipulate the market, thus violating both antifraud and market manipulation provisions.
Sun oversaw more than 600,000 TRX wash transactions between two cryptocurrency trading accounts from April 2018 to February 2019. These daily transactions involved trading between 4.5 million and 7.4 million TRX.
Moreover, Sun allegedly sold TRX into the secondary market, generating proceeds of $31 million. The sales were deemed illegal and unregistered offers of the token.
Sun and his celebrity endorsers disguised the fact that they were paid to promote TRX and BTT. Therefore, authorities accuse him of actively encouraging investors to purchase these tokens.
The public was misled into believing that these celebrities were not paid, spokespersons. They had an unbiased interest in TRX and BTT as a result.
American rapper DeAndre Cortez Way, Austin Mahone, actress Lindsay Lohan, YouTuber Jake Paul, and singer Aliaune Thiam, commonly known as Akon, were among the celebrities supporting TRX and BTT.
Gurbir S. Grewal, Head of the SEC’s Division of Enforcement, stated:
While we’re neutral about the technologies at issue, we’re anything but neutral when it comes to investor protection.
The lawsuit alleges Sun and his associates employed a classic scheme to defraud and injure investors. This involved selling securities without fulfilling registration and disclosure obligations and manipulating the market for those securities.
Related Reading | Binance Launchpad’s Space ID Attracts $2.85 Billion In Pledges
Furthermore, Mahone and Soulja Boy are the only celebrities mentioned in the lawsuit who haven’t settled with the SEC. In addition, the other celebrities have agreed to pay over $400,000 in disgorgement, interest, and penalties. The US regulator will bar Sun from serving as an officer or director of any crypto securities company.