Another Malta ‘Blockchain Island’ champion wanted by the US

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

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

Sun was also charged with fraudulently 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 improprieties in how the Tronix, or TRX, cryptocurrency was being traded. The currency is also traded in Malta.

Sun opened a company, Tron Limited, in Malta in 2018, but it has now been closed down and struck from the registry of companies.

The SEC also charged eight celebrities who worked with Sun’s companies – including Lindsay Lohan, Jake Paul and Akon – with promoting the tokens without disclosing 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).

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

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

Rumours about the crypto-personality’s various citizenships – which reportedly include Grenada, St Kitts and Nevis and Malta – swirl around the internet.

He was reportedly on the cusp of applying for Maltese citizenship through the cash for passports programme and is reported to have met Economy Minister Silvio Schembri about the prospect, according to technology portal The Verge.

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

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

Sun tweeted in March 2018 how his company, Tron, “strongly supports the great foresight of PM Joseph Muscat and hopes to build up Blockchain Island with Malta gov. We are seriously considering investing and operating in Malta in the following weeks with an announcement by our strategic partner.”

#TRON strongly supports the great foresight of PM @JosephMuscat_JM and hopes to build up Blockchain Island with Malta gov. We are seriously considering invest and operate in Malta in the following weeks with announcement by our strategic partner @binance @cz_binance #TRX $TRX

— H.E. Justin Sun 🍌 (@justinsuntron) March 26, 2018

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

But from the SEC’s charges, it seems 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 year’s grace period operate practically without surveillance.

Until that ‘grandfathering period’ elapsed and their applications were processed, such companies were essentially exempt from the need for authorisation or even the need to comply with anti-money laundering laws.

This largely explains the rush of big companies, including Binance and others, registering their interest in setting up in Malta at a time when other governments were focusing on regulating the sector rather than attracting as many entrants as possible as Malta was doing.

Many, such as Binance, left Malta when regulations became more stringent.

The accusations the SEC levelled against Sun and his companies include the unregistered offer and sale of crypto asset securities and fraudulently manipulating the secondary market for TRX through extensive wash trading – a form of market manipulation where an investor tries 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 tout his TRX and BTT cryptocurrencies without disclosing their compensation.

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

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