SEC Charges Justin Sun and his Companies Along with 8 Celebrities

• The SEC has charged Justin Sun and his companies for fraud and other securities law violations.
• The Commission also charged 8 celebrities for illegal touting of Sun’s crypto asset securities.

On March 22, the Securities and Exchange Commission (SEC) announced “charges against Justin Sun and three of his companies. SEC charged his companies for the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT).” The companies are Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc., according to the press release.

Along with Sun’s companies, SEC charged “with fraudulently manipulating the secondary market for TRX through extensive wash trading.” This involves “the simultaneous or near-simultaneous purchase and sale of a security to make it appear actively traded without an actual change in beneficial ownership, and for orchestrating a scheme to pay celebrities to tout TRX and BTT without disclosing their compensation.”

The SEC complaint has been filed in the U.S. District Court for the Southern District of New York. It states that “Sun, BitTorrent Foundation, and Rainberry offered and sold BTT in unregistered monthly airdrops to investors.” These investors are from the U.S. who bought and held TRX in Tron wallets or participated in crypto asset trading platforms. And each of these unregistered offers and sales violated Section 5 of the Securities Act, according to the complaint.

According to the SEC, Sun violated the anti-fraud and market manipulation provisions of the federal securities laws. Allegedly, by orchestrating a scheme, Sun artificially inflated the apparent trading volume of TRX in the secondary market.

Nearly from April 2018 through February 2019, he allegedly told his employees to engage in more than 600k wash trades of TRX between two crypto asset trading platform accounts, which he owned. Daily wash trades were between 4.5 million and 7.4 million TRX.

Statements by SEC Heads

Gary Gensler, SEC Chair said “This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure.” Additionally, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement said “While we’re neutral about the technologies at issue, we’re anything but neutral when it comes to investor protection.”

The 8 Celebrities

The Commission further charged 8 celebrities for “illegally touting TRX and/or BTT. These celebrities did not disclose that they were compensated for doing so. They also did not disclose the amount of their compensation.” The 8 celebrities are as follows:

1. Lindsay Lohan (Actress)
2. Jake Paul (Boxer)
3. DeAndre Cortez Way (Soulja Boy) (A Musician)
4. Austin Mahone (Singer)
5. Michele Mason (Kendra Lust) (A Porn Actress)
6. Miles Parks McCollum (Lil Yachty) (A Rapper)
7. Shaffer Smith (Ne-Yo) (A Musician)
8. Aliaune Thiam (Akon) (Senegalese-American Singer)

Except Cortez Way and Mahone, rest of the celebrities agreed to pay a total of more than $400,000 in disgorgement, interest, and penalties to settle the charges. They also did not admit or deny the SEC’s findings.