US Judge Rejects SEC’s Attempt to Hamper Justin Sun’s Defense

A New York District Judge has denied a motion by the U.S. Securities and Exchange Commission (SEC) aimed at weakening Tron founder Justin Sun’s defense.

The ruling, delivered on August 19 by United States District Court Judge Edgardo Ramos, represents a setback for the SEC as it continues its case against Sun.

The case, which began in March 2023, alleges that Sun and the Tron Foundation engaged in the unregistered offer and sale of securities, manipulative trading, and illegal promotion of crypto assets, specifically Tron (TRX) and BitTorrent (BTT) tokens.

In response, Sun and his legal team moved to dismiss the lawsuit in April, arguing that the SEC lacks jurisdiction over foreign digital asset transactions conducted on global platforms.

SEC is Overreaching by Applying Laws to Foreign Conduct

Central to the defense’s argument is the assertion that the SEC is overreaching by attempting to apply U.S. securities laws to predominantly foreign conduct.

Sun’s defense has highlighted that the tokens in question were sold outside the United States, with efforts made to exclude the U.S. market.

The SEC, however, countered with a claim that Sun’s defense introduced a new argument related to the “common enterprise” prong of the Howey test, which determines whether an asset qualifies as a security.

On August 12, the SEC requested that the court either disregard this argument in Sun’s motion to dismiss or allow them to file additional responses.

However, Judge Ramos ruled in favor of the defense, stating that no new argument had been introduced and denying the SEC’s request.

“In light of defendants’ concession that they [are] not challenging the “common enterprise” element of the Howey test, the SEC’s letter motion to strike the untimely argument or for leave to file a sur-reply is DENIED.”

SEC Edits Tron Lawsuit

In April, the SEC edited its Tron lawsuit against Sun and his crypto companies following his attempted dismissal of the litigation.

In the updated court filings, the SEC claimed that the Tron founder “traveled extensively” to the U.S. throughout “his work on behalf of the Tron Foundation, the BitTorrent Foundation, and/or Rainberry.”

Meanwhile, the SEC has been facing growing criticism due to its “regulation-by-enforcement” approach to the crypto industry.

Critics argue that the SEC has failed to establish a clear regulatory framework for cryptocurrencies, opting instead to pursue legal action against key industry players.

As reported, a coalition of seven U.S. states has come together to challenge the Securities and Exchange Commission’s (SEC) regulation of cryptocurrency.

Led by Iowa Attorney General Brenna Bird, the states have filed an amicus brief arguing that the SEC’s attempt to regulate cryptocurrencies constitutes a “power grab” that would stifle innovation, harm the crypto industry, and exceed the agency’s authority.

The coalition includes Arkansas, Indiana, Kansas, Montana, Nebraska, with Oklahoma becoming the latest state to join.

Earlier this year, SEC Commissioner Hester Peirce said that the regulatory agency is currently operating in an “enforcement-only mode” when it comes to the regulation of cryptocurrencies.

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