The U.S. Securities and Exchange Commission is considering pausing its civil fraud case against TRON founder Justin Sun to explore a possible resolution that could benefit both parties and the public.
In a letter sent on Wednesday to the U.S. District Judge Edgardo Ramos in Manhattan, attorneys representing Sun and the SEC requested a pause in the case, proposing to provide a status update 60 days following the stay, as originally reported by Reuters. The case, filed in March 2023, accuses Sun and his companies of illegally distributing Tronix (TRX) and BitTorrent (BTT) and artificially inflating TRX trading volume.
Specifically, the SEC accused Sun of selling TRX and BTT tokens as investments without proper registration through unregistered “bounty programs.” These programs encouraged interested parties to promote the tokens on social media and chat groups, and create BitTorrent accounts in exchange for receiving TRX and BTT. The SEC also claimed that Sun and his companies conducted monthly giveaways of BTT to U.S. investors who already held TRX in their wallets or on certain exchanges.
Additionally, the SEC accused Sun of wash trading, creating the illusion of active trading and liquidity in the markets for these tokens. Specifically, from April 2018 to Feb. 2019, Sun allegedly instructed his employees to carry out over 600,000 wash trades of TRX using two trading accounts he controlled. These trades involved manipulating the market with daily wash trades of between 4.5 million and 7.4 million TRX. To execute this scheme, Sun allegedly supplied a large quantity of TRX. Additionally, he was accused of selling TRX in the secondary market, which resulted in $31 million in proceeds.
Finally, Sun also hired several high-profile celebrities to promote these tokens without disclosing their compensation. The SEC has also charged eight celebrities, including Lindsay Lohan, Akon, and Austin Mahone, for unlawfully promoting TRX and/or BTT without revealing that they were paid for these endorsements and the specific amounts they received.
Prior to this, Justin Sun was in another legal spotlight when the blockchain protocol Chain considered taking legal action against him. This was sparked by Sun’s allegations that the company was involved in Onyxcoin (XCN) market manipulation—an accusation that seems particularly ironic in light of the Sun’s charges filed by the SEC.
Sun made these allegations in a post on Jan. 24, claiming that Chain was using high leverage and contracts that could harm exchange users. He suggested that crypto exchanges should be cautious and indicated he would report Chain’s supposed illegal activities to the SEC and DOJ. In response, Chain rejected Sun’s accusations, stating that it does not engage in trading its XCN and pointing out that the XCN token is managed by OnyxDAO. Following this, Sun reiterated his accusations, this time directing attention to OnyxDAO and urging regulatory bodies to investigate.
