Tron Criticizes SEC’s Global Regulatory Claims, Deems Lawsuit Excessive

The organization behind the Tron blockchain has formally requested a New York federal court to dismiss a lawsuit brought against it by the U.S. Securities and Exchange Commission (SEC), arguing that the SEC lacks jurisdiction over international digital asset transactions that cater primarily to foreign buyers on global platforms.

This move underscores Tron’s position that the American regulatory body is overstepping its bounds by attempting to enforce U.S. securities laws on activities that occur predominantly outside the United States.

🏦 The #Tron team has raised concerns about potential overreach by the #SEC, urging the court to dismiss the lawsuit filed by the regulator last year.https://t.co/JibIzmbOyV

— GN Crypto (@GNcrypto_news) April 1, 2024

In a significant legal challenge filed last year, the SEC targeted Tron’s founder, as well as the Tron Foundation, the BitTorrent Foundation, and Rainberry Inc., a San Francisco-based company acquired by Tron in 2018.

The lawsuit alleges that the sale of Tron (TRX) and BitTorrent (BTT) tokens constituted unregistered securities offerings.

Tron, headquartered in Singapore, counters this claim in its legal motion, emphasizing that the token sales targeted non-U.S. markets and that deliberate measures were taken to exclude the U.S. market.

Tron maintains that the SEC has not proven any initial offerings or sales of the tokens to U.S. residents.

Tron requested that the U.S. SEC lawsuit be dismissed, saying it had no authority to govern digital assets sold to foreign users on global platforms. Tron said the sale of the tokens is entirely outside the United States. The U.S. SEC issued an electronic subpoena to Justin Sun,…

— Wu Blockchain (@WuBlockchain) April 1, 2024

Tron’s defense further argues that subsequent secondary sales of the tokens on a U.S.-based platform, which caters to a global user base, do not constitute unregistered U.S. securities, calling the SEC’s position “tenuous at best.”

The foundation also challenges the SEC’s authority under the Howey test, a U.S. legal standard for determining what constitutes an investment contract and thus a security, to classify the tokens as investment contracts.

The SEC’s lawsuit also accuses Justin Sun, Tron’s Chinese-born Grenadian founder, of engaging in manipulative trading practices known as “wash trading” to artificially inflate market activity for the tokens.

Additionally, the regulator alleges Sun secretly compensated celebrities for promoting the tokens, without presenting concrete evidence of victims or wrongful intentions behind these actions, particularly any that would affect individuals in the United States.

Breaking: Justin Sun and @trondao request dismissal of @SECGov lawsuit arguing the #SEC has no authority over global token sales to foreign users, claims $TRX tokens sold outside USA 👀

Subpoena was emailed to Justin Sun and the #Tron Foundation for alleged illegal activities…

— MartyParty (@martypartymusic) April 1, 2024

Tron criticizes the SEC for its broad generalizations and lack of specific factual allegations against each defendant, highlighting the regulatory body’s reliance on vague claims to support its accusations of fraud, which lack detailed misstatements.

The foundation further invokes the major questions doctrine, which emphasizes that regulatory authority lies with Congress and not with regulatory agencies, a principle other cryptocurrency entities have referenced in seeking dismissal of SEC lawsuits against them.

The SEC is expected to respond to Tron’s dismissal motion within the next two weeks, although it has not yet commented on the matter publicly.

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