A federal judge in New York has rejected the motion of the U.S. Securities and Exchange Commission (SEC) to expedite legal proceedings in its ongoing securities fraud case against the Tron Foundation and its founder, Justin Sun. The court’s decision marks a setback for the SEC, which sought to address procedural disputes before a potential trial.
Denial of Expedited Proceedings
The SEC had filed a motion requesting a pre-trial conference and permission to submit additional responses in its lawsuit against the Tron Foundation, Justin Sun, the BitTorrent Foundation, and Rainberry Inc. The Securities and Exchange Commission alleged that the defendants made new legal arguments regarding the so-called 'common enterprise' element of the Howey Test, which is used to distinguish investment contracts under U.S. securities laws. The SEC noted that the defense presented this argument after they filed their motion to dismiss the case, which is against legal norms. The agency wanted to strike the argument or, in the alternative, get permission to file a supplemental reply regarding the matter. However, the judge refused this request from the regulatory firm on the grounds that the defense never challenged the 'common enterprise' element of the Howey Test.
Defense's Response to Allegations
Counsel for Tron and Justin Sun responded to the allegations, alleging that the regulatory agency had manufactured a dispute over a non-existent issue. They claimed that their main defense was based on the third element of the Howey Test that relates to the investment of money with the expectation of profits to be earned from the efforts of others. Furthermore, the firm’s legal representatives opposed the agency’s demands for more documents stating that the matter would only create more confusion in the case. They also pointed out that their argument on the third prong of the Howey Test had been well made and that the SEC had misrepresented their stance.
Jurisdiction Issues
Consequently, the defense lawyers based on the Howey Test, have also stated that the regulatory agency has no jurisdiction over the case. In March, they argued that the sales of TRX and BTT tokens were mainly made outside the United States and the target market was foreigners. Tron’s argument was that the regulatory agency is going beyond its boundaries by seeking to impose U.S. securities laws on transactions that happened in other jurisdictions. The SEC, in April, came up with a counterclaim in this regard stating that Justin Sun was a frequent traveler within the United States during the period in question. The agency claims that these trips, which it says were made on behalf of Tron and related entities, are sufficient basis for U.S. jurisdiction over the case.
The court's decision to deny the SEC’s motion to expedite the proceedings represents a temporary victory for the Tron Foundation and Justin Sun in their ongoing legal battle with the regulator.
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