​SEC accuses TRON and Huobi CEO of market manipulation

What’s new? On March 22, the US Securities and Exchange Commission (SEC) accused TRON blockchain founder and Huobi crypto exchange CEO Justin Sun of selling and issuing unregistered securities, fraud, and market manipulation. The SEC filed suit against Sun, the TRON Foundation, the BitTorrent Foundation, and BitTorrent (Rainberry) in connection with the sale of TRON (TRX) and BitTorrent (BTT) tokens. The regulator alleges that the assets are unregistered securities and that the defendants “fraudulently manipulated” the TRX secondary market through an “extensive wash trading” scheme.

Link to the lawsuit

Wash trading is the repeated buying and selling of the same asset over a short period of time in order to mislead other market participants about its price or liquidity.

What else is known? According to the SEC, Sun attempted to artificially inflate TRX trading volume through the wash trading scheme by having his employees “engage in more than 600,000 wash trades of TRX between two crypto asset trading platform accounts he controlled.” According to the court filing, TRON Foundation employees conducted the trades, the BitTorrent and TRON foundations controlled the accounts, and Rainberry employees transferred funds for the trading.

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The regulator also sued celebrities Lindsay Lohan, Jake Paul, Soulja Boy, Lil Yachty, Ne-Yo, Akon, and Michele Mason for illegal advertising of TRX and BTT. Most of them settled the charges.

According to the filing, Sun claimed on social media that celebrities should publicly report their advertising fees, with the businessman “himself arranged the payments to celebrities and knew those payments were not disclosed.” According to the SEC, between 4,5 million and 7,4 million TRX went through such wash trades daily.

“This scheme required a significant supply of TRX, which Sun allegedly provided. As alleged, Sun also sold TRX into the secondary market, generating proceeds of $31 million from illegal, unregistered offers and sales of the token,” the SEC said.

In a statement, Gary Gensler, chair of the commission, said that the case is an example of the potential risks crypto investors may face with unregistered securities.

Sun’s response. The entrepreneur responded by saying that “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.” He said that “the complaint lacks merit” and stressed that the crypto community will continue to build 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

Sun also noted that the SEC’s regulatory framework for digital assets is still in its infancy and needs further development. He stated that he is willing “to collaborate with governments and regulatory bodies globally that are dedicated to establishing transparent guidelines for regulating and working with the cryptocurrency industry given the important role it can play.”

The entrepreneur also recalled that Dominica recently adopted TRX and BTT as legal tender.

Earlier, experts at crypto market data aggregator CoinGecko reported that in February, the volume of wash trading of non-fungible tokens on six major marketplaces increased by 126%.