The Securities and Exchange Commission issued a summons for Tron Foundation Ltd. founder Justin Sun, as well as rapper Soulja Boy and YouTube music star Austin Mahone, following a civil complaint from the agency last month over tokens issued by Tron and the filesharing company BitTorrent.
The trio were named by the SEC as the only holdouts in a celebrity-filled complaint declaring Tronix and BTT, the BitTorrent token, as unregistered securities offerings. Actress Lindsay Lohan, YouTuber-turned-boxer Jake Paul, porn star Kendra Lust, rapper Lil Yachty, and singers Akon and Ne-Yo all settled with the SEC over similar civil charges, per an agency release announcing the case last month. The celebrities who settled agreed to disgorge their earnings and settle charges without admitting or denying the SEC's findings.
If Sun, Mahone, and Soulja Boy, whose given name is Deandre Cortez Way, do not respond within 21 days then a judgement by default will be entered against them "for the relief demanded in the complaint."
The SEC asked a court to bar Sun and his companies from ever offering securities, including digital assets, again, forfeit their proceeds plus interest and pay civil penalties. The complain also sought to permanently bar Sun from serving as the officer or director of any company that issues securities, a standard punishment sought in similar complaints.
The markets regulator also wants Way and Mahone to be banned from receiving money for future endorsements of digital assets and to pay their own penalties.
Inflating Tronix's volume
Sun, who no longer claims a diplomatic post with Grenada despite continuing to use the acronym for 'His Excellency,' a diplomatic honorific, in his Twitter handle, has been accused of the most serious charges. Those include Sun allegedly orchestrating a scheme to artificially inflate Tronix's trading volume, in addition to selling unregistered securities and paying for celebrity endorsements without disclosing that those were paid spokespeople.
According to the SEC, Sun directed employees to engage in more than 600,000 wash trades of Tronix between multiple crypto exchanges in order to create the appearance of high demand for the token, and boost its price. The SEC found that between 4.5 million and 7.4 million tokens were wash traded daily, a major violation of antifraud provisions.
Sun, who also owns BitTorrent Foundation, which the SEC says is a for-profit organization despite its nonprofit title, allegedly made $31 million from illegal sales of the token in the secondary market.
Though he has yet to respond in court, the Tron Foundation founder answered the SEC's charges on Twitter last month, saying that "we believe the complaint lacks merit, and in the meantime will continue building the most decentralized financial system."
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