Justin Sun, Grenada’s immediate former Ambassador and Permanent Representative to the World Trade Organization (WTO) is among nine people charged with fraud by the US Securities and Exchange Commission (SEC).
The Tron founder and his companies Tron Foundation, BitTorrent Foundation, and Rainberry were accused of having schemed since August 2017 to distribute billions of crypto assets known as Tronix (TRX) and BitTorrent (BTT), and artificially inflated trading volume.
The 32-year-old Chinese-born Grenadian cryptocurrency entrepreneur had served as the WTO representative from December 2021 but was recalled when the National Democratic Congress won the general election in June 2022.
According to a court document filed on Wednesday in the US District Court Southern District of New York, besides Sun and his companies, eight other celebrities were charged in the complaint. Singers Akon, Austin Mahone, and Ne-Yo; rappers Soulja Boy and Lil Yachty; actress Lindsay Lohan; social media personality and boxer Jake Paul; and porn actress Kendra Lust are accused of illegally promoting Sun’s crypto assets.
All but Soulja Boy and Mahone agreed to settle, without admitting wrongdoing, and together paid more than US$400 000.
The complaint alleges that Sun and his companies offered and sold TRX and BTT as investments through multiple unregistered “bounty programs,” which directed interested parties to promote the tokens on social media, join and recruit others to Tron-affiliated Telegram and Discord channels, and create BitTorrent accounts in exchange for TRX and BTT distributions.
It further alleges that Sun, BitTorrent Foundation, and Rainberry offered and sold BTT in unregistered monthly airdrops to investors, including in the United States, who purchased and held TRX in Tron wallets or on participating crypto asset trading platforms. The SEC said each of these unregistered offers and sales violated Section 5 of the Securities Act.
The Commission also alleges that Sun violated the anti-fraud and market manipulation provisions of the federal securities laws by orchestrating a scheme to artificially inflate the apparent trading volume of TRX in the secondary market.
The SEC said Sun’s activity generated tens of millions of dollars of illegal profit at other investors’ expense. He was also accused of concealing payments to celebrities to promote TRX and BTT on social media accounts, misleading the public into thinking they had “unbiased interest in TRX and BTT, and were not merely paid, spokespersons”.
In its complaint, the SEC said Sun sold TRX and BTT as securities, and thus their sale needed to be registered with the agency.
Justin Sun allegedly inflated apparent trading volume in TRX through extensive “wash trading”, involving simultaneous or near-simultaneous purchases and sales with no real change in ownership.
“Sun’s wash trading team, working under his direction, engaged in hundreds of thousands of TRX wash trades between accounts that Sun ultimately controlled. None of those trades involved any change in beneficial ownership or had any legitimate economic purpose,” stated the complaint.
From at least April 2018 to February 2019, Sun ordered employees to conduct hundreds of thousands of wash trades between two accounts he controlled, the SEC said.
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