The Securities and Exchange Commission announced on Wednesday that it was charging Justin Sun, the founder of TRON Foundation and owner of BitTorrent, and a slew of celebrities, including Lindsay Lohan, for releasing and shilling for, respectively, the cryptocurrencies Tronix (TRX) and BitTorrent (BTT).
The federal regulator said in a statement that Sun’s release and sale of TRX and BTT was akin to selling unregistered securities and alleged that he also manipulated markets for the tokens through wash trading—or falsely inflating the trading volume of an asset.
“The SEC’s civil complaint earlier today is just the latest example of actions it has taken against well known players in the blockchain and crypto space,” said Sun in a statement on Twitter. “We believe the complaint lacks merit, and in the meantime will continue building the most decentralized financial system.”
The SEC’s civil complaint earlier today is just the latest example of actions it has taken against well known players in the blockchain and crypto space. We believe the complaint lacks merit, and in the meantime will continue building the most decentralized financial system.— H.E. Justin Sun 孙宇晨 (@justinsuntron) March 23, 2023
The SEC also took aim at eight celebrities Sun allegedly paid—without publicly disclosing their compensation—for touting TRX and BTT. They include Lohan, Jake Paul, Ne-Yo (Shaffer Smith), and Soulja Boy (DeAndre Cortez Way). Six out of the eight people named, except for Soulja Boy and Austin Mahone, have already settled with the agency and agreed to pay more than $400,000 in fines.
“This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure,” SEC Chair Gary Gensler said in a statement.
The announced charges, filed in the U.S. District Court for the Southern District of New York, continue Gensler’s months-long crackdown of crypto companies and personalities since the fall of FTX in November. Other targets of the SEC include the cryptocurrency exchange Kraken as well as crypto firms Gemini and Genesis.
A protege of Jack Ma, best known as the cofounder of Chinese tech giant Alibaba, Sun splashed into the world of crypto during the ICO craze of 2017, when he and TRON released TRX. He quickly raised $70 million—just days after the Chinese government had banned initial coin offerings.
A Chinese national, Sun fled from Beijing to Seoul, as TRX continued to rise in value. He used the money from the ICO to buy BitTorrent, the peer-to-peer file sharing system, for $140 million, according to The Verge, and expanded his crypto empire through an acquisition of the crypto firm Poloniex. In 2021, he resigned as CEO of the TRON Foundation to become Grenada’s representative to the World Trade Organization.
Update, March 23, 2023: This article has been updated with a comment from Justin Sun.