Tron Foundation and other firms associated with Tron (TRX) founder Justin Sun are asking a judge to dismiss the lawsuit lodged against them by the U.S. Securities and Exchange Commission (SEC).
In a motion filed late last month, lawyers for Tron say that the SEC is going beyond its jurisdiction when it moved to regulate foreign entities and individuals.
“The SEC is not a worldwide regulator. Its efforts to leverage highly attenuated contacts to the United States, to extend US securities laws to cover predominantly foreign conduct, go too far and should be rejected.”
In March 2023, the SEC sued Tron Foundation, Justin Sun, BitTorrent Foundation and Rainberry Inc (formerly known as BitTorrent) on allegations that the defendants offered and sold unregistered crypto securities, namely TRX and BitTorrent (BTT).
The SEC also accused Sun and his firms of fraudulent manipulation of TRX’s secondary market by engaging in “extensive wash trading”.
Lawyers for Sun and his firms now contend that the initial coin offering of TRX and the initial exchange offering of BTT are “out of the SEC’s regulatory reach,” but that hasn’t stopped the US markets regulator from pursuing the defendants.
“Undeterred, the SEC seeks to haul the foreign defendants to this Court nonetheless, asserting that later secondary sales on a U.S.-based platform serving users worldwide, and global social media contests, and airdrops of those same digital assets, somehow were ‘unregistered US securities offerings,’ even though the connection to the US forum in each instance is tenuous at best. The remaining claims suffer similar jurisdictional defects.”
According to Tron Foundation, the SEC’s actions could have a negative impact across the globe.
“Without a clear regulatory regime that details when a token is a security, how token creators can comply if they offer securities, and how foreign actors in the space fit in the picture, the SEC’s regulatory expansion risks destabilizing the entire global digital asset market. At present, no project and no jurisdiction is safe from the SEC’s ever-broadening campaign against digital assets. Thus, to the extent the SEC has stated a viable claim (and it has not), the Court should dismiss this case under the major questions doctrine.”
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