The SEC does not have the authority to regulate the sale of foreign digital assets to foreign investors on global platforms outside the United States. This is stated in objection Tron Foundation and its founder Justin Sun to the lawsuit filed by the Commission.
In March 2023, the SEC charged the entrepreneur and three companies associated with him with an unregistered securities offering in the form of Tron (TRX) and BitTorrent (BTT) tokens.
The agency also noted that Sun and the Tron Foundation, BitTorrent Foundation and Rainberry (formerly BitTorrent) manipulated the TRX secondary market through “wash trading.”
The motion states that the SEC “is not a global regulator.” Her
efforts to apply U.S. securities laws “to the conduct of predominantly foreign persons” go “too far.”
Lawyers asked the New York court to dismiss the claims.
The document claims that the tokens found buyers “entirely overseas.” The organizers excluded the American market to avoid possible SEC statements that the assets could have ended up with US residents.
The defendants stressed that the SEC's designation of secondary token sales “on a U.S.-based platform serving users around the world” as an offering of unregistered securities is “baseless at best.”
The lawyers explained that even assuming the authority of the SEC, the tokens do not fall within the classification of investment contracts in accordance with the criteria of the Howey test.
Sun and his associated companies have also denied allegations of “wash trading.”
The lawyers pointed out that the SEC failed to detail “the factual allegations, setting out the role of each accused person/entity in each claim” and relied on “generalizations and inferences to support its already meager, often unspecific allegations.”
Sun and his related companies believe the case should be dismissed under the fundamental issues doctrine, a Supreme Court ruling that says Congress will make laws and not grant oversight powers. Kraken and Coinbase used the same arguments in their motions to dismiss the SEC's lawsuits.
The SEC must respond to Tron's request within two weeks.
Earlier, several members of the US House of Representatives sent a letter to the Commission demanding clarification of the legality of cryptocurrency operations of the broker in the field of digital assets Prometheum.
In July 2023, US Republican Senator Tommy Tuberville called on the Department of Justice and the SEC to study the activities of Prometheum. He suspected the company's CEO, Aaron Kaplan, of lying under oath during congressional hearings and violating securities laws.
Source: Cryptocurrency
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