The Securities and Exchange Commission (SEC) announced charges against crypto entrepreneur Justin Sun and three of his companies—Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc.—for the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT). Sun and his companies are also charged with fraudulently manipulating the secondary market for TRX through extensive wash trading and for orchestrating a scheme to pay celebrities to tout TRX and BTT without disclosing their compensation.
Eight celebrities, including Lindsay Lohan, Jake Paul, Soulja Boy, Austin Mahone, Kendra Lust, Lil Yachty, Ne-Yo, and Akon, were charged for illegally touting TRX and/or BTT without disclosing their compensation.
The SEC’s complaint alleges that Sun and his companies offered and sold TRX and BTT as investments through unregistered “bounty programs” and unregistered monthly airdrops to investors, violating Section 5 of the Securities Act. Additionally, Sun is accused of orchestrating a scheme to artificially inflate the apparent trading volume of TRX in the secondary market from at least April 2018 through February 2019. Sun allegedly sold TRX into the secondary market, generating $31 million from illegal, unregistered offers and sales of the token.
SEC Chair Gary Gensler emphasized the high risk investors face when crypto asset securities are offered and sold without proper disclosure. Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said, “Sun and others used an age-old playbook to mislead and harm investors by first offering securities without complying with registration and disclosure requirements and then manipulating the market for those very securities.”
Today we charged crypto entrepreneur Justin Sun and three of his wholly-owned companies for the unregistered offer and sale of crypto asset securities Tronix and BitTorrent.— U.S. Securities and Exchange Commission (@SECGov) March 22, 2023
With the exception of Soulja Boy and Austin Mahone, the charged celebrities agreed to pay a total of more than $400,000 in disgorgement, interest, and penalties to settle the charges, without admitting or denying the SEC’s findings.