Justin Sun, founder of Tron, will face a jury trial after the United States Securities and Exchange Commission accused him of “orchestrating the unregistered offer and sale, manipulative trading, and unlawful touting of crypto asset securities.”
The SEC accused Sun, the Tron Foundation, the BitTorrent Foundation, and Rainberry of offering and selling Tron and BitTorrent (BTT) as securities in a document filed on March 22 in U.S. District Court for the Southern District of New York. The banking authority also charged Sun with engaging in “manipulative wash trading,” which involved using celebrities to increase interest in two coins.
American rapper DeAndre Cortez Way, often referred to as Soulja Boy, singer Aliaune Thiam, also known as Akon, and actor Lindsay Lohan were among the celebrities supporting TRX and BTT. Akon was also responsible for plans to build “crypto cities” in Uganda and Senegal.
“Although the celebrities were paid to promote TRX and BTT, their touts on social media did not disclose that they had been paid or the amounts of their payments,” said the SEC complaint. “Thus, the public was misled into believing that these celebrities had unbiased interest in TRX and BTT, and were not merely paid spokespersons.”
According to the SEC, the Securities Act was broken by Sun’s conduct in the offer and sale of TRX and BTT. According to the regulator, Sun sold more than $31 million worth of TRX as a result of more than 600,000 wash transactions of the token between April 2018 and February 2019.
“While we’re neutral about the technologies at issue, we’re anything but neutral when it comes to investor protection,” said SEC enforcement director Gurbir Grewal. “As alleged in the complaint, Sun and others used an age-old playbook to mislead and harm investors by first offering securities without complying with registration and disclosure requirements and then manipulating the market for those very securities.”
Besides Mahone and Soulja Boy, the other famous people involved in the case have reached settlements with the SEC and agreed to pay more than $400,000 in disgorgement, interest, and penalties. The American regulator declared that it intended to “permanently prohibit” Sun from holding any officer or director positions with companies that deal in cryptocurrencies.
Kim Kardashian was fined $1.2 million by the SEC in October 2022 for promoting EthereumMax (EMAX) coins on her social media channels. SEC Chair Gary Gensler issued a warning to celebrities not to “lie to investors when you tout a security” after a similar deal with retired NBA star Paul Pierce in February.