The US Securities and Exchange Commission(SEC) announced charges against crypto asset entrepreneur Justin Sun and three of his wholly-owned companies, Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc. (formerly BitTorrent), for the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT). 

According to the press release, Justin Sun and his companies were charged with "fraudulently manipulating the secondary market for TRX through extensive wash trading".  Wash trading is a form of market manipulation where an individual or entity buys and sells the same financial asset (such as stocks, cryptocurrencies, or commodities) simultaneously or in close proximity to each other, creating the illusion of increased trading activity and higher demand for the asset.

"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." SEC wrote in the statement.

In addition, Justin Sun, BitTorrent Foundation, and Rainberry allegedly offered and sold BTT in unregistered monthly airdrops to investors, including those in the US who bought and held TRX in Tron wallets or on participating crypto asset trading platforms. The complaint further states that each of these unregistered offers and sales violated Section 5 of the Securities Act.

Eight celebrities, including Lindsay Lohan, Jake Paul, DeAndre Cortez Way (Soulja Boy), Austin Mahone, Michele Mason (Kendra Lust), Miles Parks McCollum (Lil Yachty), Shaffer Smith (Ne-Yo), and Aliaune Thiam (Akon), have been charged for illegally promoting TRX and/or BTT without disclosing their compensation.

The charged celebrities agreed to pay a total of more than $400,000 in disgorgement, interest, and penalties to settle the charges.

“This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure,” said SEC Chair Gary Gensler. “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.”