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(Kitco News) - Justin Sun, the founder of the Tron network and part owner of the Huobi cryptocurrency exchange, has been issued a summons by a U.S. district court and now has 21 days to respond regarding a lawsuit filed by the Securities and Exchange Commission (SEC).
On March 22, the SEC filed a lawsuit against Sun, alleging that he illegally sold crypto securities and conspired to artificially inflate the trading volume of crypto assets.
According to the summons, Sun must now provide a response to these charges. The summons was addressed to two locations in Singapore: 8 Lady Hill Road, a Good Class Bungalow in the Tanglin area, as well as an office space at 9 Temasek Boulevard, Suntec Tower Two.
Failure to reply in the allotted time will result in a summary judgment. “If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint,” the summons said. “You also must file your answer or motion with the court.”
The charges against Sun and three of his wholly-owned companies – Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc. (formerly BitTorrent) – are mainly focused on the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT).
Allegations include fraudulently manipulating the secondary market for TRX through extensive wash trading, and orchestrating a scheme to pay celebrities to tout TRX and BTT.
“From at least April 2018 through February 2019, Sun allegedly directed his employees to engage in more than 600,000 wash trades of TRX between two crypto asset trading platform accounts he controlled, with between 4.5 million and 7.4 million TRX wash traded daily,” the SEC wrote. “This scheme required a significant supply of TRX, which Sun allegedly provided. As alleged, Sun also sold TRX into the secondary market, generating proceeds of $31 million from illegal, unregistered offers and sales of the token.”
The story garnered extra attention when it was first announced as eight celebrities, including Lindsay Lohan, Jake Paul, Soulja Boy, Austin Mahone, Kendra Lust, Lil Yachty, Ne-Yo and Akon, were also charged in the marketing scheme, which involved “illegally touting TRX and/or BTT without disclosing that they were compensated for doing so and the details of their compensation.”
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The SEC, which views TRX and BTT as securities, alleged 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.”
Aside from Soulja Boy and Austin Mahone, the other celebrities named agreed to pay a total of more than $400,000 in disgorgement, interest, and penalties to settle the charges, without admitting to or denying the SEC’s findings. Only Mahone and Soulja Boy were named in the latest summons.
Sun responded to the original complaint from the SEC by saying that it “lacks merit,” and suggested that “the SEC's regulatory framework for digital assets is still in its infancy and is in need of further development.”
The Tron founder has yet to comment on the newly issued summons.
