The US Securities and Exchange Commission (SEC) has charged Justin Sun, the founder of TRON, and eight celebrities, including Lindsay Lohan and Soulja Boy, for alleged wash trading and illegal promotion of TRON and BitTorrent tokens.
The SEC alleges Sun directed employees to engage in over 600,000 wash trades of TRX between the two crypto asset trading platform accounts he controlled. Wash trading is selling and buying the same asset at the same price to create fake trading volume.
Moreover, the celebrities are accused of promoting TRON without disclosing that they were being paid. According to the SEC, Sun paid $2 million to upgrade the token without revealing that information to the public.
Sun is also alleged to have made misleading statements about the partnership between TRON and Baidu, China’s leading search engine, which he claimed was “officially verified” when it was not.
The charges against Sun and the celebrities have caused a significant drop in TRON’s value, with the cryptocurrency plummeting by 13.5% following the news.
The SEC has been cracking down on cryptocurrency fraud in recent years, and this case is yet another example of its efforts to protect investors and ensure that cryptocurrencies are traded fairly and transparently.
In a statement, the Chief of the SEC Enforcement Division’s Cyber Unit, Kristina Littman, said, “When celebrities endorse products, they must disclose any compensation received for the endorsement. The SEC is committed to ensuring that issuers and promoters of digital asset securities comply with the securities laws, which includes providing investors with accurate information.”
Sun and the celebrities have yet to comment on the charges.
The SEC alleges Sun also directed his employees to purchase $5 million worth of BitTorrent tokens on Binance during the initial exchange offering (IEO) in January 2019. The complaint alleges Sun and his employees used the TRX they had purchased in the wash trading scheme to create a false impression of interest in the BitTorrent IEO. The SEC claims that Sun and his employees then sold a portion of the inflated BTT tokens for nearly $50 million, netting a profit of over $40 million.
The celebrities named in the complaint include rapper Soulja Boy, actor and musician Lindsay Lohan, and reality TV star Ne-Yo. The SEC claims that these individuals promoted TRON on social media platforms without disclosing that they were being paid for their endorsements.
In response to the SEC’s allegations, Justin Sun tweeted that he had “always been committed to compliance” and that TRON had cooperated with the SEC’s investigation. Sun said he would “continue to lead TRON with compliance, transparency, and accountability.”
The news has significantly impacted the price of TRON, which has fallen by 13.5% since the announcement. The broader cryptocurrency market has also been affected, with Bitcoin and Ethereum down by around 3% at the time of writing.
The SEC’s action against Sun and the celebrities marks the latest in a series of crackdowns on cryptocurrency-related fraud and misconduct. The agency has recently taken action against several companies and individuals for allegedly violating securities laws, including Ripple Labs and its executives and John McAfee, the founder of the antivirus software company McAfee.
