SEC Charges Tron Founder Justin Sun in $31M Crypto Fraud Case

The Securities and Exchange Commission has charged Justin Sun, creator of the Tron blockchain, with multiple securities law violations centered on the unregistered sale of TRX and BTT tokens. According to the SEC complaint, Sun and his affiliated entities—the Tron Foundation, BitTorrent Foundation, and Rainberry (formerly BitTorrent)—illegally offered and sold these crypto assets as unregistered securities, generating approximately $31 million in proceeds from unauthorized token sales. The regulator further alleges that Sun directed ‘extensive wash trading’ of TRX tokens, creating artificial trading volume and price activity to mislead investors about genuine market interest.

SEC enforcement director Gurbir Grewal characterized the alleged scheme as following an ‘age-old playbook to mislead and harm investors.’ The complaint details how Sun allegedly supplied substantial TRX quantities to facilitate the wash trading operation, which involved ‘hundreds of thousands of TRX wash trades among accounts that Sun effectively managed.’ This market manipulation created what the SEC described as an ‘inflated illusion of legitimate investor interest’ designed to maintain TRX’s price artificially.

The SEC’s complaint extended beyond Sun to include eight celebrities who allegedly promoted TRX and BTT tokens without disclosing they were paid for their endorsements. The named celebrities include Lindsay Lohan, Jake Paul, Soulja Boy (DeAndre Cortez Way), Lil Yachty, Akon, Ne-Yo (Shaffer Smith), and Austin Mahone. According to the SEC, Sun paid these influencers to promote the tokens on social media platforms while concealing the compensation arrangements from the public.

Six of the eight celebrities—Lohan, Paul, Lil Yachty, Akon, Ne-Yo, and Jake Paul—have already reached settlements with the SEC, agreeing to pay combined penalties exceeding $400,000 without admitting or denying the allegations. Soulja Boy and Austin Mahone remain unresolved in the regulatory action. This case continues a pattern of SEC scrutiny toward celebrity crypto promotions, following recent actions against NBA player Paul Pierce for similar cryptocurrency promotion violations.

The SEC’s announcement triggered immediate market consequences for Tron’s native token. According to CoinGecko data, TRX plummeted nearly 11.6% in the 24 hours following the charges, reflecting investor concerns about the regulatory scrutiny and alleged fraudulent activities. The complaint also revealed Sun’s use of unregistered ‘bounty programs’ that rewarded users for promoting BTT and TRX on social media and recruiting participants to Telegram and Discord groups, with payments made in cryptocurrency.

SEC Chair Gary Gensler issued a stern warning to investors, stating that ‘this case serves as an additional cautionary tale that just because influential people or celebrities support certain investment opportunities, such as securities backed by crypto assets, doesn’t mean that those investment goods are appropriate for all investors.’ The regulatory action underscores the SEC’s continued focus on enforcing securities laws in the cryptocurrency space, particularly regarding undisclosed promotional arrangements and market manipulation schemes.