Justin Sun's application rejected by SEC lawsuit: US lacks jurisdiction over Tron

Tron Foundation Limited, BitTorrent Foundation Ltd., Justin Sun, and Rainberry, Inc., the predecessor of BitTorrent, recently filed a motion to dismiss against the U.S. Securities and Exchange Commission (SEC) on 5/30, alleging that the SEC's lawsuit is too vague and lacks specific factual support, attempting to apply U.S. securities laws to foreign entities and activities with only minimal connections to the United States.

Justin Sun Challenges SEC Dismissal Motion, Questions Legal Basis

Justin Sun Argues Lack of Offering to U.S. Residents

The defendants argue that the SEC's accusations are vague and fail to provide specific facts to support their claims.

The Tron protocol was developed in 2017 to revolutionize online entertainment using blockchain technology and established the non-profit Tron Foundation in Singapore. The TRX token was initially launched on the Ethereum blockchain and later migrated to the Tron blockchain. Its initial token offering (ICO) was conducted overseas and not targeted at U.S. residents. The BitTorrent protocol was acquired by entities associated with Justin Sun and integrated with blockchain technology, introducing the BTT token for protocol use.

Justin Sun: Lack of U.S. Jurisdiction

The defendants argue that the SEC's complaint lacks sufficient facts to make their claims plausible, especially under the "fraud" allegations.

They emphasize the court's lack of personal jurisdiction over them as the alleged activities took place overseas without substantial connections to the U.S. Furthermore, the SEC's accusations fail to specify the role of each defendant in the alleged misconduct and do not demonstrate the applicability of U.S. securities laws to the transactions, citing the Supreme Court's Morrison decision that limits the extraterritorial reach of these laws.

The fraud allegations by the SEC lack specificity and do not demonstrate a strong inference of fraudulent intent. The defendants also claim a lack of fair notice, asserting they could not have foreseen that their actions would be subject to U.S. securities laws.

Justin Sun's Defense Evaluation

The defense argues that the SEC lacks sufficient evidence to establish jurisdiction over Justin Sun and his foreign companies since the initial issuance of TRX and BTT took place outside the U.S. and was not aimed at the U.S. market or investors.

Additionally, the SEC's accusations lack specific details and do not clearly outline the actions of each defendant. Citing the Morrison case, the defendants believe that the transactions involving TRX and BTT should not fall under U.S. securities laws, and the SEC's fraud allegations appear weak due to their lack of specificity.

Expected to Conclude by September

However, the final decision will depend on the court ruling. Justin Sun's case will also have implications for a wide range of cryptocurrency issuers, potentially expanding or limiting the SEC's jurisdiction over foreign entities. The SEC is expected to respond by June 28, with Justin Sun's reply due by July 26, and a verdict anticipated before the end of this year's September.