A New York District Judge has denied the U.S. Securities and Exchange Commission’s (SEC) request to hold a pre-trial conference or submit additional responses in its ongoing securities fraud lawsuit against Tron founder Justin Sun and the Tron Foundation.
On August 19, U.S. District Court Judge Edgardo Ramos ruled against the SEC, rejecting its attempt to challenge a key argument made by Sun’s defense. The SEC’s lawsuit accuses Sun and his companies of orchestrating the unregistered sale of securities, manipulative trading practices, and the unlawful promotion of Tron (TRX) and BitTorrent (BTT) tokens.
In April, Sun and the Tron Foundation filed a motion to dismiss the case, arguing that the SEC has no jurisdiction over digital asset offerings made to foreign purchasers on global platforms. They claim that the transactions in question occurred primarily outside the U.S., with deliberate steps taken to avoid involving U.S. residents.
The central issue in the case revolves around the Howey test, a legal standard used to determine whether a transaction constitutes an investment contract. Sun’s defense initially focused on challenging two aspects of the test: the investment of money and the expectation of profits. The SEC, however, argued that the defense introduced a new argument concerning the “common enterprise” element of the Howey test, which had not been addressed earlier.
On August 12, the SEC requested that Judge Ramos either disregard this alleged new argument or allow the SEC to file a sur-reply to address it. However, in his August 19 ruling, Judge Ramos sided with the defendants, 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,” Judge Ramos stated in his order.
Sun’s defense argues that the SEC is overreaching by attempting to apply U.S. securities laws to activities that primarily occurred outside the United States. They contend that the SEC is not a global regulator and that its efforts to regulate international digital asset transactions go beyond its legal authority.
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