SEC Sues Tron Founder Justin Sun for Market Manipulation and Offering Unregistered Securities

SEC Sues Tron Founder Justin Sun for Market Manipulation and Offering Unregistered Securities

The U.S. Securities and Exchange Commission (SEC) has taken action against Justin Sun, the founder of Tron, and the Tron Foundation, issuing charges for offering unregistered securities and market manipulation. Additionally, a group of influencers have been charged by the organization for promoting tron without disclosing that they were being compensated for their endorsements.

Tron Founder Justin Sun Charged for Selling Unregistered Securities and Market Manipulation

The U.S. SEC announced today a series of charges against Tron founder Justin Sun, and the Tron Foundation, declaring that the foundation offered TRX as an unregistered security, violating securities laws. Bittorrent token (BTT), which was launched after Sun took over Bittorrent Inc. in 2018, was also mentioned as being part of these offerings. In the filed complaint, the SEC states:

All TRX purchasers, including those who tendered value for TRX other than cash or crypto assets, invested in a common enterprise alongside Sun and the Tron Foundation, who at all times retained significant TRX holdings.

The statement makes similar allegations regarding BTT, stating it “was offered and sold as a security, specifically as an investment contract.”

The SEC also declares that Justin Sun orchestrated a scheme to manipulate the price of tron (TRX) on crypto exchanges using different accounts involved in daily wash trading activities, tasking part of his team in moving significant amounts of TRX through different exchanges. One of the accounts involved, according to the SEC complaint, belonged to Sun’s father.

Through this scheme, between 4.5 million and 7.4 million TRX were allegedly wash traded daily, in more than 600,000 operations.

Celebrities Also Charged for Illegal Promotion of Tron and Bittorrent Token

As part of the action of the U.S. SEC, a series of influencers and celebrities were also charged for promoting these securities without disclosing they were being paid to do so. The SEC claims that Sun indirectly instructed these celebrities to not disclose they were being part of a campaign, using employees as messengers.

Among the celebrities that were included in the lawsuit are Lindsay Lohan, Jake Paul, DeAndre Cortez Way (AKA Soulja Boy), Austin Mahone, Michele Mason (AKA Kendra Lust), Miles Parks McCollum (AKA Lil Yachty), Shaffer Smith (AKA Ne-Yo), and Aliaune Thiam (AKA Akon). All of them, except for Cortez Way and Mahone, have already settled with the regulator, paying more than $400,000 in “disgorgement, interest, and penalties.”

SEC chair Gary Gensler stated:

This case demonstrates again the high-risk investors face when crypto asset securities are offered and sold without proper disclosure.”

Tags in this story
and Aliaune Thiam (AKA Akon), Austin Mahone, bittorrent token, BTT, DeAndre Cortez Way (AKA Soulja Boy), Gary Gensler, justin sun, Michele Mason (AKA Kendra Lust), Miles Parks McCollum (AKA Lil Yachty), Securities, Shaffer Smith (AKA Ne-Yo), tron, trx, unregistered, US SEC, wash trading

What do you think about the legal actions that the U.S. SEC is exerting against Justin sun and the Tron Foundation? Tell us what you think in the comments section below.

Sergio Goschenko

Sergio is a cryptocurrency journalist based in Venezuela. He describes himself as late to the game, entering the cryptosphere when the price rise happened during December 2017. Having a computer engineering background, living in Venezuela, and being impacted by the cryptocurrency boom at a social level, he offers a different point of view about crypto success and how it helps the unbanked and underserved.

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Ethereum price at $1.4K was a bargain, and a rally toward $2K looks like the next step

Ethereum price at $1.4K was a bargain, and a rally toward $2K looks like the next step

Ether’s (ETH) price reached $1,400 on March 10, which proved to be a bargain as the cryptocurrency rallied 27.1% until March 21. However, the three reasons that supported the price gain, including correlation with tech stocks, its increasing total value locked and its deflationary token economics, all suggest that the path to $2,000 is set in stone. 

There are numerous explanations for Ether’s 19.4% decline over the past six months. Ethereum’s Shanghai hard fork upgrade was delayed from March to early April and after Shanghai, Ethereum’s roadmap includes the “Surge” “Verge,” “Purge,” and “Splurge” updates. In reality, the longer these intermediate steps to achieve scalability take, the greater the likelihood that competing networks will demonstrate efficacy and possibly establish a competitive advantage.

Another potentially concerning issue on the minds of investors is the real chance of price impact when validators are finally able to unlock their 32 ETH deposits following the completion of the Shapella hard fork. While it is impossible to predict how many of the 16 million ETH currently staked on the Beacon Chain will be sold on the market. There is a compelling argument in favor of the transition to liquid staking platforms, as they can use liquid staking derivatives on other decentralized finance networks without sacrificing their staking yield.

Traders could construct a narrative based on regulatory uncertainty, especially after U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler’s September 2022 statement that proof-of-stake cryptocurrencies could be subject to securities laws. In February 2023, the SEC reached an agreement compelling the cryptocurrency exchange Kraken to cease offering crypto staking services to U.S.-based clients, and the exchange also paid $30 million in disgorgement.

Correlation versus application-focused tech companies

To understand why Ether gained 15% in less than three days after briefly trading below $1,400 on March 10, traders must switch from a price-based analysis to a market capitalization comparison. On March 10, Ethereum’s market cap closed at $175 billion.

Oracle, SAP, and Salesforce are similar to Ethereum in that their software enables users to access shared computing resources. This is in contrast to chipmakers Nvidia and TSMC, infrastructure providers Microsoft and Oracle, and technology companies Apple and Cisco that all heavily rely on equipment.

ETH vs. Oracle (ORCL), SAP (SAP), Salesforce (CRM). Source: TradingView

The market capitalizations of Oracle, Salesforce and SAP are comparable to Ether’s at $233 billion, $188 billion and $149 billion, respectively. Ultimately, centralized and decentralized solutions permit businesses to integrate their proprietary software so that all third parties and relevant departments can consult, process, share and store data.

Considering the past six months of data, Ether’s price has performed similarly to those companies. The drop below $1,400 on March 10 was illogical if the correlation between application-focused tech stocks and the price of Ether remains valid.

ETH’s total value locked sticks at $30 billion

The total value locked (TVL) of the Ethereum network was $24 billion on November 24, 2022, and increased by 30% to $30 billion by March 21, 2023. Therefore, if no other factors influence the price, one could anticipate a 30% price increase during that six-month period. Except, that was not the case on March 10, when Ether traded at $1,400, representing a mere 8% increase from six months prior and indicating a disconnect between the value deposited in the network’s smart contracts and the ETH price.

This 22% difference between the 30% increase in TVL and the 8% increase in ETH price indicated that Ether’s true value should have been near $1,700, a level that was reached three days later on March 13, 2023. This simple model excludes a number of variables that influence supply and demand and the resulting price level, but it does provide an indication based on historical data.

Related: Coinbase submits petition to SEC explaining that staking is not securities

Ether’s deflationary mechanism is in full force

On November 10, 2021, the price of Ether was $4,869, a record high for the cryptocurrency. However, a great deal has changed since then, including the burning of 3,016,607 ETH via Ethereum Improvement Proposal 1559. This equates to an additional $5.4 billion in capitalization that would have otherwise been created, thereby adding to the supply side and restraining price appreciation.

Currently, market leader Bitcoin (BTC) is trading down 59% from its $69,000 all-time high. That does not necessarily mean Ether should reduce the gap versus Bitcoin, but it shows how discounted ETH currently stands at $1,780. The deflationary standard paves the way for Ether’s perception as a scarce digital asset, which is particularly promising during inflationary periods in the global economy.