SEC Charges Justin Sun and Celebrities with Violating Securities Laws

The Securities and Exchange Commission (SEC) announced on Wednesday that Tron founder Justin Sun and his companies violated securities laws, accusing him of market manipulation, fraud, and ‘airdropping’ unregistered securities to investors.

In addition to Sun himself, the financial regulatory body stated that it is suing the Tron Foundation, BitTorrent, and Rainberry, three companies owned by Sun. The lawsuit claims that the cryptocurrencies tron (TRX) and bittorrent (BTT) are unregistered securities and that Sun manipulated them in the secondary market, as well as his companies.

– Sun violated anti-fraud and market manipulation provisions of federal securities laws by orchestrating a scheme to artificially inflate the apparent trading volume of TRX on the secondary market – stated the SEC in a press release.

The alleged market manipulation occurred between April 2018 and February 2019, when Sun directed his employees to conduct at least $600,000 worth of wash trading of TRX between two exchanges he owned, the lawsuit claims. The agency asserts that Sun profited from illegal gains totaling $31 million from the sale of tokens.

TRX plummeted after the SEC’s announcement, dropping 11 percent in just over 30 minutes to $0.059 from $0.067, according to CoinGecko, which listed the token as the 17th largest cryptocurrency by market capitalization.

At the same time, the SEC announced that it is filing a lawsuit against celebrities for failing to disclose that they were paid to promote tronix and bittorrent tokens. Among the celebrities were influencer Jake Paul, actress Lindsay Lohan, and pornographic actress Michelle ‘Kendra Lust’ Mason.

Musicians DeAndre ‘Soulja Boy’ Way, Miles ‘Lil Yachty’ McCollum, Aliaune ‘Akon’ Thiam, Shaffer ‘Ne-Yo’ Smith, and Austin Mahone were also charged. Besides Soulja Boy and Austin Mahone, the SEC stated that the celebrities agreed to pay over $400,000 to settle their costs, without admitting or denying them.

A similar action was taken against influencer and reality star Kim Kardashian and boxer Floyd Mayweather last October for their promotion of ethereummax. Kardashian agreed to pay $1.26 million in fines to settle the charges.

On the same day, SEC Chairman Gary Gensler released a video on Twitter warning celebrities not to engage in promoting digital assets without appropriate disclosures, explaining why it is harmful to investors.

SEC Enforcement Division Director Gurbir Grewal confirmed on Wednesday the agency’s stance, asserting that Sun explicitly told celebrities not to mention that they were being paid.

– Sun paid celebrities with millions of social media followers to highlight unregistered offerings while specifically directing them not to disclose their compensation. This is precisely the behavior that federal securities laws are designed to protect investors against – said Grewal.