The US Securities and Exchange Commission (SEC) has announced charges against Justin Sun, founder of the cryptocurrency platform Tron, and three of his wholly-owned companies. The charges relate to the unregistered offer and sale of crypto asset securities TRX and BTT, as well as fraudulently manipulating the secondary market.
The SEC alleges that Sun and his companies offered and sold TRX and BTT as investments through multiple unregistered “bounty programs,” directing interested parties to promote the tokens on social media and create BitTorrent accounts in exchange for TRX and BTT distributions.
Sun, BitTorrent Foundation, and Rainberry are also accused of offering and selling BTT in unregistered monthly airdrops to investors who purchased and held TRX in Tron wallets or on participating crypto asset trading platforms.
The Commission further alleges that Sun violated antifraud and market manipulation provisions of the federal securities laws by orchestrating a scheme to artificially inflate the apparent trading volume of TRX in the secondary market.
Sun allegedly directed his employees to engage in more than 600,000 wash trades of TRX between two crypto asset trading platform accounts he controlled, with between 4.5 million and 7.4 million TRX wash traded daily. In addition to Sun, the SEC charged eight celebrities for illegally touting TRX and/or BTT without disclosing.
Coinbase, the popular cryptocurrency exchange, also received a Wells notice from the SEC focused on staking and asset listings. A Wells notice typically precedes an enforcement action.
Coinbase has spent an extraordinary amount of time and resources seeking regulatory clarity from the SEC, says crypto lawyer Jake Chervinsky. Coinbase CEO Brian Armstrong explained that the legal process would provide an open and public forum where Coinbase can demonstrate that the SEC has not been fair, reasonable, or even demonstrated a seriousness of purpose when it comes to its engagement on digital assets.