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Justin Sun, the founder of Tron, has received a summons from the U.S. District Court for the Southern District of New York regarding a recent lawsuit filed by the Securities and Exchange Commission (SEC).
The billionaire risks facing a “default judgment” if he does not reply to the summons within 21 days, indicating that he may incur penalties.
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- In a filing made on Wednesday, the court instructed Sun to reach out to SEC attorney Adam B. Gottlieb with a response to the agency’s allegations.
- “If you do not respond, a default judgment will be entered against you for the relief sought in the complaint,” it stated.
- On March 22, the SEC initiated legal action against Sun for breaching securities laws by issuing unregistered securities in the forms of BTT and TRX.
- The commission also accused the founder of engaging in wash trading to influence the price of TRX, in collaboration with the Tron Foundation, the BitTorrent Foundation, and BitTorrent, all of which he controls.
- Several celebrities, including Lindsay Lohan, Jake Paul, Michele Mason, Soulja Boy, Lil Yachty, Ne-Yo, and Akon, were also charged for endorsing such tokens without revealing that they were compensated for their promotions. Kim Kardashian faced similar allegations from the SEC last year for promoting Ethereum Max.
- This year, the SEC and other regulatory bodies have intensified their scrutiny of crypto creators for securities infractions as regulators and industry leaders continue to debate what qualifies as a “security.”
- SEC chairman Gary Gensler has consistently referenced the Howey Test, which defines securities as assets issued to raise funds that come with an expectation of profit derived from the efforts of others. In a lawsuit against KuCoin in March, New York Attorney General Letitia James contended that even Ethereum qualifies as a security.
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