Another Malta ‘Blockchain Island’ champion wanted by the US

Another former champion of Malta’s ‘Blockchain Island’ cryptocurrency craze in 2018 and 2019 has been investigated and is now facing charges of fraud and securities violations.

Justin Sun, an early entrant, along with Binance, to Malta’s then-unregulated convenient free-for-all Blockchain Island was this week charged by the US Securities and Exchange Commission with the unregistered offering and sale of crypto-asset securities.

Sun was also charged with manipulating the price of TRX, his cryptocurrency.

In a complaint filed in New York federal court on Wednesday, the US Securities and Exchange Commission accused Sun and the companies of improperly trading the Tronix, or TRX, cryptocurrency. The currency is also traded in Malta.

Sun opened a company, Tron Limited, in Malta in 2018, but it has now closed down and been struck off the company register.

The SEC also accused eight celebrities who worked with Sun’s companies — including Lindsay Lohan, Jake Paul and Akon — of promoting the tokens without disclosing that they were paid to do so.

The others were Austin Mahone, DeAndre Cortez Way (Soulja Boy), Michele Mason (Kendra Lust), Miles Parks McCollum (Lil Yachty) and Shaffer Smith (Ne-Yo).

Actress Lindsay Lohan

“Thus, the public was misled into believing that these celebrities had an objective interest in TRX and BTT and were not simply paid spokespersons,” the SEC said in the lawsuit.

Six of the eight celebrities charged paid over $400,000 in total to settle the SEC’s charges.

Rumors about the crypto personality’s various citizenships – which reportedly include Grenada, St Kitts and Nevis and Malta – are swirling on the internet.

He was reportedly on the verge of applying for Maltese citizenship through the cash for passport program and reportedly met with Economy Minister Silvio Schembri about the prospect, according to technology portal The Verge.

The Shift has been unable to confirm the reports of Sun’s Maltese citizenship as he does not appear on any of the government’s official lists.

But one thing is for sure, Sun was very interested in Malta’s Blockchain Island status.

Sun tweeted in March 2018 how his company, Tron, “strongly supports the great vision of Prime Minister Joseph Muscat and hopes to build Blockchain Island with the Government of Malta. We are seriously considering investing and operating in Malta in the coming weeks with an announcement from our strategic partner.”

#THRONE strongly supports the great foresight of the PM @JosephMuscat_JM and hopes to build Blockchain Island with Malta’s government. We are seriously considering investing and operating in Malta in the coming weeks with an announcement from our strategic partner @binance @cz_binance #TRX $TRX

— HE Justin Sun 孙宇晨 (@justinsuntron) March 26, 2018

It is not known exactly what cryptocurrency activities Sun engaged in through or in Malta, and speculation points to some sort of partnership with Binance, which was active in Malta at the time.

But from the SEC’s charges, it appears he may have been just another fraudster looking to cash in on Malta’s crypto craze.

Many crypto companies rushed to Malta between October 2018 and October 2019, when they had a one-year grace period, operating virtually without monitoring.

Until that “grandfathering” period expired and their applications were processed, such companies were essentially exempt from the need for authorization or even the need to comply with anti-money laundering laws.

This largely explains the rush of major companies, including Binance and others, to register their interest in setting up in Malta at a time when other governments were focusing on regulating the sector rather than attracting as many participants as Malta did .

Many, such as Binance, left Malta as regulations tightened.

The SEC charges against Sun and his companies include the unregistered offering and sale of crypto-asset securities and the fraudulent manipulation of the secondary market for TRX through extensive wash trading – a form of market manipulation in which an investor attempts to create a series of fictitious transactions in the market by buying and selling securities.

The companies were also accused of orchestrating a scheme to pay celebrities to showcase his TRX and BTT cryptocurrencies without disclosing their compensation.

They also sold TRX and BTT as investments through several unregistered ‘bounty programs’, which offer rewards in return for promoting cryptocurrencies on media channels.

“This case demonstrates once again the high risk investors face when crypto-asset securities are offered and sold without proper disclosure,” SEC Chairman Gary Gensler said in a statement this week.