SEC sues TRON founder Justin Sun over TRX and BTT; celebrity promoters also named

The U.S. Securities and Exchange Commission (SEC) has sued Justin Sun, founder and former CEO of TRON, and related companies as seen in a statement dated March 22.

SEC highlights unregistered sales, illegal wash trading

The SEC alleges that sales of two of Sun’s cryptocurrency tokens — TRON (TRX) and BitTorrent (BTT) — constituted unregistered securities offerings.

The regulator said in an attached filing that Sun and his associated companies carried out widespread public offerings of those tokens but did not file a registration statement. The regulator also noted that no regulatory exemption was available to the organizers.

The SEC further alleged that Sun and his companies engaged in fraud through wash trading, which was intended to create the appearance of real demand and to keep the value of the tokens high. Three companies controlled by Sun moved tokens between one another on a regular basis without any true change in beneficial ownership, the SEC says.

Those parties supposedly engaged in more than 600,000 wash trades overall, trading between 4.5 million and 7.4 million TRX daily from April 2018 to February 2019. Sun also allegedly gained $31 million from illegal sales of tokens into the secondary market.

The SEC identified three of Sun’s companies as being involved in sales and the wash trading scheme. Those companies are Tron Foundation, BitTorrent Foundation, and Rainberry Inc. — the latter of which was formerly known as BitTorrent, Inc.

Celebrity endorsement also an issue

The SEC additionally alleges that various celebrities promoted BTT and TRX on social media without disclosing that Sun and his companies had paid them to do so. The question of whether those celebrities had been paid for their endorsement was raised in 2021.

The regulator named several celebrities who engaged in promotion including actress Lindsay Lohan, online influencer and former boxer Jake Paul, adult performer Kenda Lust, as well as musical artists Austin Mahone, Lil Yachty, Soulja Boy, Akon, and Ne-Yo.

All but two of those celebrities agreed to settle and pay over $400,000 in fines and penalties. They are not required to admit or deny the SEC’s findings.

Austin Mahone and Soulja boy did not agree to the settlement and are named as defendants. The SEC’s latest filing says that both individuals will continue to violate anti-touting provisions of securities law “unless restrained and enjoined.”