"Post-90s" currency circle Internet celebrity Sun Yuchen regenerated the incident. In the early morning of March 23, Beijing time, the US Securities and Exchange Commission (SEC) announced on its official website that it had filed a lawsuit against Sun Justin and his three wholly-owned companies, pointing out that Sun Justin provided and sold crypto-asset securities without registration, fraudulently manipulated the secondary market through a large number of shuffle transactions, and promoted related cryptocurrencies through celebrity effect hype.
As soon as the news came out, it triggered widespread discussion, and TRX coin and BTT coin at the center of the storm fell in response, and TRX coin once fell by more than 10%. Subsequently, Sun responded that "the complaint is unfounded, and the most decentralized financial system will continue to be established." In the eyes of analysts, Justin Sun's case also reflects that the cryptocurrency market is easy to abuse and manipulate, and investors are more susceptible to fraud and fraud. #Justin Sun##孙宇晨被美国证监会起诉 #
Alleged fraud in manipulating the market
Sun Justin was prosecuted
Sun Justin was indicted. On March 22, local time in the United States, the official website of the US Securities and Exchange Commission disclosed the content of the notification of fraud and other violations of securities laws by cryptocurrency entrepreneur Justin Sun and his company, and Justin Sun and its three companies Tron Foundation Limited (TRON), BitTorrent Foundation Ltd. and Rainberry Inc. (formerly known as BitTorrent) were sued.
According to the SEC, Justin Sun unregistered offers and sells crypto-asset securities Tronix (i.e., "TRX Coin") and BitTorrent ("BTT Coin"), as well as fraudulently manipulated the secondary market of TRX Coin through a large number of shuffle transactions, involving the simultaneous or almost simultaneous buying and selling of securities, making it appear to be actively traded but the actual beneficial ownership has not changed.
The SEC disclosed that Justin Sun and his company offer and sell TRX and BTT coins as investments through multiple unregistered "bounty programs" that lead interested parties to promote the token on social media, join and recruit others to join Tron-affiliated Telegram and Discord channels, and create BitTorrent accounts in exchange for the distribution of TRX and BTT coins. Among them, the recruited targets include 8 celebrities in the United States, who were paid by Sun and the company to promote TRX and BTT coins, but did not disclose their compensation.
Image source: SEC website
The indictment further alleges that Justin Sun, the BitTorrent Foundation and Rainberry offered and sold BTT coins in unregistered monthly airdrops (airdrops) to investors, including U.S. investors, who bought and held TRX coins on Tron wallets or related crypto asset trading platforms. The complaint alleges that the unregistered purchases violated Section 5 of the U.S. Securities Act.
The SEC investigation found that from at least April 2018 to February 2019, Sun instructed his employees to conduct more than 600,000 TRX shuffle transactions between two crypto asset trading platform accounts controlled by him, with a daily shuffle volume of between 4.5 million and 7.4 million TRX coins. Sun also sold TRX coins to the secondary market, earning $31 million from the illegal, unregistered offering and sale.
"As the allegations allege, not only did Sun and his company target U.S. investors in unregistered buying and selling, generating millions of dollars in illicit gains at the expense of investors, but they also coordinated shuffle transactions on an unregistered trading platform to create the misleading appearance of active trading of TRX coins." Sun further lured investors into buying TRX and BTT coins, and he and his celebrity promoters orchestrated a promotion to hide the fact that celebrities were paid for their tweets. Securities and Exchange Commission Chairman Gary Gensler commented.
According to An Guangyong, an expert on the credit management committee of the All-Union M&A Union, Sun Yuchen's case reflects some problems in the cryptocurrency market. On the one hand, the regulatory and legal framework of the cryptocurrency market is relatively imperfect and vulnerable to abuse and manipulation. On the other hand, the cryptocurrency market is relatively risky and uncertain, and its price fluctuates more violently due to its different sources of value than traditional assets, and investors are more susceptible to scams and fraud.
Associated cryptocurrencies plummeted
Response says "lack of basis"
After the official website of the US Securities and Exchange Commission disclosed the news of the prosecution of Sun Yuchen, the TRX coin and BTT coin involved fell in response. According to the global coin price website CoinGecko, within 1 hour of the release of the relevant news, TRX coin plunged 14%, and BTT coin fell by nearly 5%.
At the same time, Justin Sun is currently a member of the global advisory board of cryptocurrency exchange Huobi, which is closely related to Huobi, or affected by the news of Justin Sun's lawsuit, and Huobi's platform HT fell by more than 10% at the same time.
As of 17:00 on March 23, TRX coin was quoted at $0.062519, a 24-hour drop of 7.2%; BTT coin was reported at $0.000000622035, a 24-hour decline of 1.3%; HT Coin was trading at $3.66, down 9.3% in 24 hours.
Image credit: CoinGecko
It is worth mentioning that this prosecution is not the first time that Sun Justin has been involved in illegal incidents. In the past few years, there have been many topics surrounding Justin Sun, who has also been accused of being involved in deception through cryptocurrency exchange Poloniex, money laundering through immigration and other acts, and being prosecuted. In March 2022, some overseas media reported that Sun Yuchen was suspected of insider trading, fraud, money laundering and other illegal acts, and was investigated by the Internal Revenue Service, FBI and other violations. Sun Yuchen responded to the rumors through his personal social account.
After nearly a year, Sun Justin was sued by the US Securities and Exchange Commission. As for the prosecution-related matters, on March 23, Sun Yuchen also responded through his social account. Justin Sun tweeted: "The SEC's civil lawsuit earlier today is just the latest example of its actions against high-profile players in the blockchain and cryptocurrency space. We believe that this complaint is unfounded and will continue to build the most decentralized financial system. ”
Image source: Twitter
Sun mentioned that the SEC's regulatory framework for digital assets is still in its infancy and needs to be further developed. "Given the important role the cryptocurrency industry can play, we are eager to work with governments and regulators around the world who are committed to establishing transparent regulatory guidelines and working with the cryptocurrency industry." Sun Yuchen said.
At present, the SEC has filed a complaint in the District Court for the Southern District of New York. Regarding the follow-up trend of the case and the possible punishment that Sun Yuchen may face, the reporter of Beijing Business Daily also learned from a number of legal professionals. Based on the information provided by the interviewees, the current two sides have their own statements, the US Securities and Exchange Commission has confirmed Sun Yuchen's illegal behavior, and it is expected that Sun Justin is likely to settle the case by paying a fine, but the specific situation depends on the court decision.
The SEC's official website also mentioned that 6 of the 8 celebrities charged have agreed to pay a total of more than $400,000 in illegal gains, interest and fines to settle the charges, but they have neither admitted nor denied the SEC's findings.
The supervision of the currency circle continues to be strengthened
Protect investors
Sun Yuchen, who has always been a high-profile figure on social media platforms, has always been a hot figure at the center of related topics in the cryptocurrency circle. In June 2019, Sun Yuchen auctioned Buffett's lunch for nearly $4.57 million, and then canceled the meeting due to illness, pushing public opinion to a climax. At one point, Sun apologized for over-marketing.
Just on March 19, 2023, when Credit Suisse, Switzerland's second-largest banking group, was teetering in a liquidity crisis, Justin Sun spoke out on social media, claiming his intention to bid $1.5 billion to buy Credit Suisse and make it a cryptocurrency-friendly institution. Sun Yuchen's move was also accused of "rubbing the heat".
In the information disclosed by the SEC, Jensler emphasized that the case of Justin Sun and his company once again shows that the issuance and sale of crypto-asset securities without proper disclosure can bring high risks to investors.
When it comes to regulation in cryptocurrency-related areas, Gurbir S. Grewal, director of enforcement at the SEC, also said, "While we are neutral on technology, we are by no means neutral when it comes to investor protection."
Since 2021, the regulatory attitudes and policies of financial regulators in various countries on cryptocurrencies have continued to upgrade, and Chinese mainland first suspended cryptocurrency trading-related operations such as mining and currency speculation. In terms of access and business requirements for cryptocurrency-related enterprises, Hong Kong, South Korea, and the United States have also put forward restrictions one after another.
Since the collapse of the top crypto exchange FTX in the second half of 2022 triggered a liquidity crisis in the cryptocurrency circle, the SEC has taken enforcement actions against a number of heavyweights and companies in the cryptocurrency space. Just after the prosecution of Justin Sun, the SEC also issued a notice to Coinbase that it would take enforcement action against it.
An Guangyong pointed out that the difference between cryptocurrencies and traditional assets is that cryptocurrencies do not rely on actual tangible assets or physical support, but are based on distributed ledger technology and cryptographic protocol algorithms to ensure security and stability, and their value mainly comes from their demand and supply in a specific market.
An Guangyong believes that the SEC has strengthened its supervision of the cryptocurrency market in recent years, and its main purpose is to protect the rights and interests of investors. These regulatory policies include the regulation and regulation of cryptocurrency trading platforms and cryptocurrency issuance, and the restriction and regulation of cryptocurrency trading and investment behavior. The introduction and implementation of these policies have a positive effect on the stable and healthy development of the cryptocurrency market.
According to Pan Helin, co-director and researcher of the Digital Economy and Finance Research Center of Zhejiang University's International Business School, cryptocurrencies are still difficult to form independence, and are essentially a financing tool, which can easily be derived into pig-killing plates and fraud tools due to the lack of supervision. However, with the deepening of market awareness and the strengthening of regulatory policies, there will be more and more penalties for such market manipulation and deception of consumers in the future.
In this regard, Pan and Lin suggested that investors should not cross the cognitive forbidden zone to speculate on cryptocurrencies to avoid being deceived.
Beijing Business Daily reporter Liao Meng