Justin Sun, a well-known crypto entrepreneur, and his three companies- Tron Foundation, BitTorrent, and Rainberry Inc, have been accused by the US Securities and Exchange Commission (SEC) of allegedly engaging in the unregistered sale of "crypto-asset securities," as per the recent announcement made by the commission.
According to the SEC, Sun and his companies are believed to have offered and sold Tronix (TRX) and BitTorrent (BTT) tokens to the general public without registering them as securities, as part of the regulatory agency's clampdown on the cryptocurrency industry.
Apart from the charges of conducting an unregistered sale of crypto asset securities TRX and BTT, the SEC has additionally accused Justin Sun and his companies of fraudulent activities pertaining to TRX.
The SEC has accused Sun and his companies of carrying out extensive wash trading to deceitfully manipulate the secondary market for TRX. The wash trading allegations entail the simultaneous purchase and sale of the same crypto asset to create the illusion of higher trading activity than what actually exists.
Furthermore, the regulatory agency has accused Sun and his companies of inducing celebrities to endorse TRX and BTT without revealing their compensation.
The SEC has targeted yet another significant player in the world of cryptocurrency. According to the SEC's complaint, Sun and his companies offered TRX and BTT tokens as investment opportunities through unregistered "bounty programs." These programs allegedly required participants to promote the tokens on social media, recruit others to Tron's Telegram and Discord channels, and create BitTorrent accounts in exchange for TRX and BTT distributions.
The SEC claims that these bounty programs failed to provide investors with complete and accurate information and did not disclose the associated risks of these investments. Additionally, Sun is accused of violating anti-fraud and market manipulation provisions of federal securities laws by allegedly orchestrating a scheme to artificially increase the trading volume of Tronix.
During the period of April 2018 to February 2019, Sun allegedly instructed his employees to conduct more than 600,000 wash trades of TRX between two cryptocurrency trading platforms that he controlled, with a daily volume of wash trades ranging from $4 million to $7 million.
According to Gary Gensler, the SEC Chair, Sun and his associates followed a well-known tactic to deceive and injure investors.
They began by offering securities without fulfilling registration and disclosure requirements and then proceeded to manipulate the market for those securities. Additionally, Sun paid popular social media personalities with large followings to promote the unregistered offerings while insisting that they keep their compensation a secret. Regardless of the labels used by Sun and his associates, this sort of behavior is exactly what the federal securities laws were created to prevent.
After the charges were filed, the SEC stated that all celebrities, with the exception of DeAndre Cortez Way (Soulja Boy) and Austin Mahone, have agreed to settle the charges by paying over $4,000,000 in disgorgement, interest, and penalties.
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