Tron (TRX) Price Plunges as SEC Sues Justin Sun

The US Securities and Exchange Commission (SEC) has filed a lawsuit against Justin Sun, the founder of blockchain platform TRON, and three affiliated firms over allegations of illegal sales of the Tron (TRX) and BitTorrent (BTT) cryptocurrencies. 

The news of the lawsuit has had a significant impact on the price of TRX, with the token’s value plunging by 6.1% following the announcement.

In his statement, SEC Chair Gary Gensler emphasized that this case serves as an example of the potential risks crypto investors may face with unregistered securities.

According to the lawsuit, Sun and the affiliated companies engaged in a scheme to distribute billions of TRX and BTT to the public while also creating active secondary markets on which TRX and BTT could be traded.

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The SEC alleges that Sun and his companies targeted US investors in their unregistered offers and sales, generating millions in illegal proceeds at the expense of investors.

The agency further claims that the defendants were required to register these offers and sales with the SEC, but they never did so. The lawsuit also accuses Sun of directing manipulative wash trading of TRX to create the artificial appearance of legitimate investor interest and keep TRX’s price afloat. Sun allegedly accomplished this wash trading through the Tron Foundation, BitTorrent Foundation, and Rainberry.

“Sun’s wash trading team, working under his direction, engaged in hundreds of thousands of TRX wash trades between accounts that Sun ultimately controlled. None of those trades involved any change in beneficial ownership or had any legitimate economic purpose,” the lawsuit says.  

Furthermore, the SEC alleges that Sun and the affiliated companies created a publicity campaign to drive public interest in TRX and BTT. This campaign involved paying celebrities, including Austin Mahone, Jake Paul, and Lindsey Lohan, to promote or tout TRX and BTT on their social media accounts without disclosing that they had been paid or the amounts of their payments.

The lawsuit claims that Sun made false statements on social media regarding the touting campaign, stating that if any celebrities were paid to promote TRON, they were required to disclose it. However, the SEC alleges that Sun himself arranged the payments to celebrities and knew that these payments were not disclosed.

The SEC is seeking permanent injunctions, disgorgement of ill-gotten gains, and civil penalties against Sun and the affiliated companies. The lawsuit also seeks to bar Sun from participating in any offering of digital asset securities and from serving as an officer or director of a public company.