The Security and Exchange Commission sued crypto asset entrepreneur Justin Sun and three companies owned by him, Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc. (formerly BitTorrent), for selling unregistered securities, Tronix (TRX) and BitTorrent (BTT) through multiple bounty programs.
Defendants will also face charges of performing fraudulent activity by manipulating the secondary market for TRX through extensive wash trading. Wash trading is self-trading that creates fake prices to attract other investors.
Sun supposedly instructed his employees to conduct over 600,000 wash trades of TRX between two crypto asset trading platform accounts he controlled, resulting in 4.5 million to 7.4 million TRX being traded daily from April 2018 to February 2019.
Sun allegedly provided a large supply of TRX for this scheme and made $31 million by illegally and unlawfully selling TRX in the secondary market.
This involves buying and selling securities simultaneously to create fake trading activity and paying celebrities to orchestrate TRX and BTT without revealing their pay.
Therefore, the SEC also filed a complaint against eight celebrities including AKON, Lindsay Lohan, Jake Paul, DeAndre Cortez Way, Austin Mahone, Michele Mason, Lil Yachty, and Shaffer Smith.
By creating a plan to falsely increase TRX’s trading volume in the secondary market, SEC stated that Sun violated the anti-fraud and market manipulation regulations outlined in the federal securities laws.
SEC Chair Gary Gensler said, “As alleged, Sun and his companies not only targeted U.S. investors in their unregistered offers and sales, generating millions in illegal proceeds at the expense of investors, but they also coordinated wash trading on an unregistered trading platform to create the misleading appearance of active trading in TRX.
Sun further induced investors to purchase TRX and BTT by orchestrating a promotional campaign in which he and his celebrity promoters hid the fact that the celebrities were paid for their tweets.
Except Cortez Way and Mahoner, all celebs are ready to make a settlement by paying $400,000 in disgorgement, interest, and penalties without admitting or denying SEC charges.
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