- Justin Sun was sued by SEC for violating securities regulations and promoting unregistered securities.
- Eight public figures, including Lohan and Soulja Boy, were accused of illegally promoting tokens without disclosure.
- Sun and his companies allegedly used “bounty programs” and conducted wash trades to manipulate Tronix trading volume.
Justin Sun, a cryptocurrency tycoon, was reportedly sued by the U.S. Securities and Exchange Commission for allegedly violating securities regulations. Additionally, the SEC accused eight public figures, including Lindsay Lohan and the musician known as Soulja Boy, of illegally promoting tokens without disclosing compensation.
The SEC specifically claimed that Lohan and Soulja Boy promoted Tronix and/or BitTorrent tokens without disclosing any compensation. The majority of the celebrities agreed to pay more than $400,000 to settle the allegations without admitting guilt or denying the SEC’s findings, according to a statement from the agency. However, the two individuals who did not agree to pay were Soulja Boy and singer-songwriter Austin Mahone.
On Wednesday, a lawsuit was filed in federal court in New York, claiming that Justin Sun collaborated with his own companies – the Tron Foundation, BitTorrent Foundation Ltd., and Rainberry Inc. – to orchestrate the sale and offer of unregistered securities, such as Tronix and BitTorrent tokens. The lawsuit additionally accuses the cryptocurrency mogul of violating antifraud and market manipulation regulations.
Gurbir Grewal, Director of the SEC’s Enforcement Division commented:
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.
Justin Sun, an early Bitcoin investor, used his previous investments and success with a Chinese social-media app to establish Tron, a blockchain network currently utilized by thousands of gambling and gaming apps. The SEC alleged that Sun and his companies incentivized users through “bounty programs” to complete certain tasks in exchange for tokens.
Meanwhile, the agency also accused Sun of artificially inflating the trading volume of Tronix in the secondary market and directed his employees to conduct over 600,000 “wash trades” of TRX between two crypto accounts he controlled. TRX’s price dropped by approximately 12%, while the price of BTT, BitTorrent’s token, declined by over 1%.