The US Securities and Exchange Commission (SEC) has sued Justin Sun, founder and former CEO of TRON, and related companies, as seen in a statement dated.
SEC highlights unregistered sales and illegal laundering trade
The SEC alleges that Sun’s sales of two cryptocurrency tokens, TRON (TRX) and BitTorrent (BTT), constituted unregistered securities offerings.
The regulator said in athat Sun and its associated companies conducted general public offerings of those tokens, but did not file a registration statement. The regulator also noted that there was no regulatory exemption available to organizers.
The SEC further alleged that Sun and his companies engaged in fraud through wash trading, which was intended to create the appearance of a real lawsuit and keep the value of the tokens high. Three Sun-controlled companies moved tokens between each other on a regular basis without any actual change in beneficial ownership, the SEC says.
Those parties allegedly participated in more than 600,000 wash trades overall, exchanging between 4.5 million and 7.4 million TRX daily from April 2018 to February 2019. Sun also allegedly made $31 million from the illegal sales of tokens in the secondary market.
The SEC identified three of Sun’s companies as being involved in the sales and business laundering scheme. Those companies are the Tron Foundation, the BitTorrent Foundation, and Rainberry Inc., the latter of which was formerly known as BitTorrent, Inc.
Celebrity endorsements are also an issue
The SEC also alleges that several 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 these celebrities had been paid for their endorsement was.
The regulator named several celebrities who participated in the promotion, including actress Lindsay Lohan, online influencer and former boxer Jake Paul, adult artist Kenda Lust, as well as music artists Austin Mahone, Lil Yachty, Soulja Boy, Akon and Ne-Yo.
All but two of those celebrities have agreed to settle and pay more than $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 accept the settlement and are named as defendants. The latest SEC filing says both individuals will continue to violate the securities law’s anti-promotion provisions “unless restrained and directed.”