Tron Foundation Defends Against SEC Lawsuit, Challenges Jurisdiction and Token Classification

The Tron Foundation has refuted the SEC's claims in a lawsuit against Justin Sun and associated companies, arguing that the SEC oversteps its jurisdiction by attempting to regulate foreign defendants. Tron contends that TRX and BTT do not meet the criteria outlined in the Howey Test and thus cannot be classified as securities, despite SEC allegations of unregistered offerings, manipulative trading, and unlawful promotion.

Tron Foundation Defends Itself Against SEC Lawsuit, Questions Jurisdiction and Classification of TRX and BTT

New York, March 28, 2023 - The Tron Foundation has vehemently refuted the allegations made by the Securities and Exchange Commission (SEC) in a subpoena issued to Justin Sun, the Tron Foundation, and affiliated entities. In a comprehensive 62-page filing submitted to a New York federal court today, Tron's legal team meticulously dismantles the SEC's claims, arguing that the agency has overstepped its jurisdiction and mischaracterized the nature of Tron's cryptocurrency offerings.

SEC's Overreach and Extraterritoriality

Tron's lawyers contend that the SEC's attempt to regulate "foreign defendants" without a clear congressional mandate constitutes an unprecedented expansion of authority. The Tron Foundation and its affiliates are incorporated outside the United States and do not conduct any business within the country's borders. Thus, Tron argues that the SEC lacks jurisdiction to regulate their activities.

"The SEC's assertion that it can regulate foreign entities simply because they may have some connection to the US market is not supported by law," said Justin Sun, founder and CEO of Tron. "This is a dangerous precedent that could stifle innovation and economic growth in the global digital asset industry."

Failure to Meet the Howey Test

The SEC had previously alleged that TRX and BTT, two digital assets issued by Tron, are securities that were sold to US investors in unregistered offerings. However, Tron argues that neither token meets the criteria outlined in the Howey Test, the Supreme Court precedent used to determine whether an investment contract constitutes a security.

"TRX and BTT are utility tokens that were sold to fund the development and growth of the Tron ecosystem," said Justin Sun. "They do not provide investors with any rights or expectations of profit, and thus do not qualify as securities under the law."

Lack of Evidence of Manipulative Trading

The SEC also accused Mr. Sun of engaging in manipulative wash trading to artificially inflate the price of TRX. However, Tron's lawyers assert that the SEC has failed to provide any evidence to support this claim.

"The SEC's allegations are baseless and defamatory," said Justin Sun. "We are confident that a court will ultimately dismiss these charges."

Tron's Attractiveness to Criminals

Tron's response to the SEC lawsuit comes at a time when a report by TRM Labs has raised concerns about the use of the Tron blockchain for illicit activities. The report alleges that Tron accounts for a significant portion of illicit cryptocurrency transactions in 2023, and that Tron-based USDT has become a preferred token for North Korea-based hackers.

"We are aware of these allegations and are taking steps to address them," said Justin Sun. "We have implemented robust anti-money laundering and know-your-customer procedures, and we are committed to preventing our platform from being used for illegal activities."

Conclusion

Tron's legal filing represents a comprehensive and vigorous defense against the SEC's allegations. The Tron Foundation and its affiliates remain confident that the court will recognize the legitimacy of their operations and dismiss the charges against them.

"We are confident that we have a strong case and that we will ultimately prevail," said Justin Sun. "We believe that the SEC's overreach in this case is a threat to the entire digital asset industry, and we are determined to fight back."