Tron Blockchain Founder Justin Sun Sued For Crypto Token Fraud

Tron Blockchain Founder Justin Sun Sued For Crypto Token Fraud

The U.S. Securities and Exchange Commission (SEC) has charged crypto entrepreneur Justin Sun with fraud and market manipulation. The agency also brought civil charges against celebrity figures, including actress Lindsay Lohan and Youtube star Jake Paul, who promoted crypto tokens issued by Sun’s companies through their various social media channels.

Justin Sun was Sued by the SEC For Fraud and Market Manipulation 

The lawsuit filed at the U.S. District Court for the Southern District of New York accuses Sun and three of his companies – Tron Foundation Limited, BitTorrent Foundation Limited, and Rainberry Inc. – of being involved in the unregistered offer and sale of crypto assets Tronix (TRX) and BitTorrent (BTT). 

Justin Sun was Sued by the SEC For Fraud and Market Manipulation 

The agency charged the Tron blockchain founder for manipulating the price of TRX in the secondary market through illegal wash trading – a process that misleads investors into believing that the trading volume for a particular security is higher than its original value, which in turn, legitimizes the token’s trade. Sun is also accused of orchestrating a scheme to pay celebrities to promote TRX and BTT tokens without disclosing the amount they received as compensation. 

Celebrities Including Lindsay Lohan, Kendra Lust, and Akon Settled Charges With SEC For Promoting the Tokens  

The financial regulator filed civil charges against eight celebrities: actresses Lindsay Lohan and Kendra Lust, rappers Soulja Boy and Lil Yachty, singers Akon, Austin Mahone, and Ne-Yo, and Youtube star turned professional boxer, Jake Paul, for promoting the tokens through their various social media channels without disclosing the fact they were paid and the amount offered for doing so. 

The complaint alleges that Sun and his companies sold TRX and BTT as investments via multiple unregistered “bounty programs” to interested parties. These individuals then joined Tron-affiliated Telegram and Discord channels and promoted the tokens on social media to recruit others to join the group. They were also offered TRX and BTT as rewards in exchange for creating BitTorrent accounts. 

Moreover, Sun and his companies, BitTorrent Foundation and Rainberry, offered and sold BTT via monthly airdrops to investors in the United States who already purchased and held TRX in Tron wallets or other cryptocurrency exchanges that supports the tokens.

The SEC says Sun ordered his employees to wash trade between 4.5 million and 7.4 million TRX tokens daily between his two crypto exchanges – Poloniex and Huobi. More than 600,000 wash trades were conducted between April 2018 to February 2019. Sun, who supplied the TRX required for the scheme, also sold the unregistered token illegally on the secondary market to generate $31 million in sales revenue. 

Celebrities Including Lindsay Lohan, Kendra Lust, and Akon Settled Charges With SEC For Promoting the Tokens  

In a statement released by the SEC, Chairman Gary Gensler said the case demonstrated the high risk faced by investors when exposing themselves to crypto assets that are offered and sold without proper disclosure.

Gurbir Grewal, Director of SEC’s Enforcement Division, said Sun and his companies misled and harmed investors by offering them securities that did not comply with the SEC’s registration and disclosure requirements. He also criticized the crypto entrepreneur for paying celebrities to promote his products to followers while asking them not to disclose their compensation. 

also read : Bitcoin Drops to 27K as Fed Announces Fresh Rate Hikes

The SEC has charged Justin Sun with violating Section 5 of the Securities Act. 

All celebrities involved in the case, except for Soulja Boy and Austin Mahone, have agreed to pay $400,000 in disgorgement, interest, and civil penalties to settle the charges, without admitting or denying the SEC’s findings. 

Tron prices dropped after news about the lawsuit broke out. At the time of writing, TRX is trading at $0.063 – down 7.2% in the last 24 hours.

The SEC has also been investigating U.S.-based crypto exchange Coinbase on allegations of violating federal securities laws. The agency has sent a Wells notice to the company concerning its crypto staking, trading, and self-custody wallet services. 

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