The US Securities and Exchange Commission (SEC) has issued a summons for Tron Foundation Ltd. founder Justin Sun, rapper Soulja Boy, and YouTube music star Austin Mahone over their alleged involvement in unregistered securities offerings.
The summons follows a civil complaint from the agency last month, which named Sun, Mahone, and Soulja Boy as the only holdouts in a celebrity-filled complaint that declared Tronix and BTT, the BitTorrent token, as unregistered securities offerings.
According to the SEC, Sun directed employees to engage in over 600,000 wash trades of Tronix between multiple crypto exchanges, in order to create the appearance of high demand for the token and boost its price.
The SEC found that between 4.5 million and 7.4 million tokens were wash traded daily, a major violation of antifraud provisions. Sun allegedly made $31 million from illegal sales of the token in the secondary market.
Celebrity Settlements
Actress Lindsay Lohan, YouTuber-turned-boxer Jake Paul, porn star Kendra Lust, rapper Lil Yachty, and singers Akon and Ne-Yo settled with the SEC over similar civil charges, per an agency release announcing the case last month. The celebrities who settled agreed to disgorge their earnings and settle charges without admitting or denying the SEC’s findings.
Sun, Mahone, and Soulja Boy have been given 21 days to respond to the SEC’s summons. If they do not respond within that timeframe, a default judgment will be entered against them “for the relief demanded in the complaint.”
Potential Penalties
The SEC is seeking to bar Sun and his companies from ever offering securities, including digital assets, again, and to forfeit their proceeds plus interest and pay civil penalties. The complaint also seeks to permanently bar Sun from serving as the officer or director of any company that issues securities. The markets regulator also wants Mahone and Soulja Boy to be banned from receiving money for future endorsements of digital assets and to pay their own penalties.
Sun’s Response
Though he has yet to respond in court, the Tron Foundation founder answered the SEC’s charges on Twitter last month, saying that “we believe the complaint lacks merit, and in the meantime will continue building 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
