SEC sues Justin Sun over TRX, BTT, market manipulation

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The Securities and Exchange Commission (SEC) has filed a lawsuit against Justin Sun, affiliated firms, and celebrity promoters, alleging market manipulation and sales of unregistered securities.

The SEC specifically alleges that TRX and BTT were both offered and sold as securities without registering with it and that Sun directed market manipulation, including wash trading.

In determining that TRX is a security, the SEC specifically describes how it was promoted as an investment, including referencing growth and rewards. The regulator also cites the fact that the whitepaper described an executive team that was working to make sure that TRX was successful.

It also points to communications from the Tron Foundation that announced plans to buy back TRX from the market. It also described how Justin Sun would use Twitter to promote TRX to people in the United States.

The SEC also highlights how the sale of ~$30 million worth of TRX by the Tron Foundation via an exchange also included sales to US persons.

On the more humorous side of things, the SEC describes an ’emoji contest’ in which people could receive TRX in exchange for posting stories about Tron using emojis on social media. It also took a similar stance on social media content that saw TRX offered in exchange for tweeting using #niTRON. The argument seems to hinge on the fact that the individuals were promoting this ‘valuable’ asset which it alleges is an unregistered security.

Read more: Justin Sun’s stablecoin TUSD curiously grows amid market meltdown

Similarly, the SEC describes how BTT was promoted by Sun and his foundation, alleging that airdrops of it to TRX holders were an offer or sale of an unregistered security. There was also a series of promotions that allowed users to receive BTT as a reward for pushing it on social media.

Market manipulation

The SEC alleges that Sun, the Tron Foundation, the BitTorrent Foundation, and Rainberry Incorporated engaged in a market manipulation scheme involving wash trading to artificially inflate the price of TRX and create a false perception of investor interest.

As part of this scheme, the team allegedly opened an account using the personal information and identification of a Rainberry employee without their knowledge. This account was referred to as the ‘Bancor Account.’

Sun allegedly provided his own TRX to the team so that they would have enough available to engage in the wash trading scheme, and the team was reportedly told by ‘the boss’ of “the need to increase trade volume.”

Celebrity promotion

Furthermore, the SEC alleges that Sun personally directed payments to celebrities and influencers, including Austin Mahone and DeAndre Cortez Way (more commonly known as Soulja Boy). They are also named as defendants in this suit for failing to disclose payments when promoting TRX and BTT.

The SEC specifically alleges that Sun instructed his employees to make sure that the celebrities did not disclose that they were paid. He had previously denied involvement in paying celebrities for their promotion, though he was perfectly willing to claim it as an endorsement of TRX.

The Tron Foundation allegedly provided the exact language for these tweets.

Besides this lawsuit, the SEC also announced that it filed and settled charges against six celebrities who promoted TRX and BTT.

Justin Sun

The SEC claims that Sun personally directed various entities, employees, and promoters to engage in this multi-faceted securities fraud scheme.

This new lawsuit comes shortly after rumors began to circulate that His Excellency had been removed from the Grenadian ambassador corp and may have lost his diplomatic immunity. No definitive statement on Sun’s status has been provided by the Grenadian foreign affairs office.

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