Introduction
On March 5, 2026, U.S. Eastern Time, the Securities and Exchange Commission (SEC) issued Litigation Release No. 26496, submitting a proposed final judgment regarding lawsuits against Sun Yuchen, the TRON Foundation (hereinafter TRON), the BitTorrent Foundation (hereinafter BitTorrent), and Rainberry, Inc., which was approved and entered by the U.S. District Court for the Southern District of New York on March 9. This nearly three-year-long regulatory dispute over the TRX token has reached a resolution. According to the proposed final judgment filed by the SEC on March 5, 2026, Rainberry will accept a permanent injunction and pay a civil penalty of $10 million for violations of Section 17(a)(3) of the Securities Act; the SEC also plans to dismiss all remaining charges against Rainberry and all charges against Sun Yuchen, TRON, and BitTorrent.
Thus, a three-year regulatory battle has ended in settlement. Behind this case, we can glimpse potential shifts in U.S. cryptocurrency regulation: Why did the SEC only pursue charges related to wash trading and withdraw other allegations? How has the SEC’s approach to crypto regulation changed since Trump took office? What compliance red lines might this settlement reveal for project teams, exchanges, and investors in the crypto industry? This article will analyze the logic and signals behind these developments, based on the SEC official announcement and case background.
Tracing the Roots: How Did the Lawsuit Originate?
To understand the deeper logic behind the SEC’s settlement with Sun Yuchen and related entities, it’s necessary to revisit the origins of the dispute and clarify the core legal basis and charges the SEC initially filed. Going back to 2023, on March 22, the SEC formally filed a lawsuit in the Manhattan federal court (Case No. 1:23-cv-02433), targeting Sun Yuchen and three affiliated entities: TRON, BitTorrent, and Rainberry. The complaint was amended in April of the following year. The SEC’s core allegations focus on violations related to the issuance, trading, and promotion of the TRX token, directly accusing the involved parties of violating multiple provisions of the U.S. Securities Act of 1933 and the Securities Exchange Act of 1934, including unregistered issuance, market manipulation, and celebrity promotion disclosures. The case was initiated during the tenure of SEC Chair Gary Gensler under the Biden administration, a period marked by strong regulatory enforcement against the crypto industry, which faced widespread opposition. Specifically, the SEC’s three main charges are as follows:
2.1 Unregistered Issuance Allegation
The SEC alleges that since August 2017, Sun Yuchen and his entities distributed billions of TRX and BTT tokens to investors worldwide, including in the U.S., through bounty programs, airdrops, and secondary market sales, all without registering the offerings as securities, violating Sections 5(a) and 5© of the Securities Act of 1933.
2.2 Wash Trading Allegation
This is the core dispute point. The SEC states that between 2018 and 2019, Sun Yuchen profited over $31.9 million from illegal issuance and sale of TRX tokens. Additionally, the SEC claims he directed employees to conduct over 600,000 wash trades of TRX between accounts under his control to artificially inflate the token’s trading volume and create a false appearance of market activity. The SEC also accuses Rainberry of facilitating these activities by creating transactions that involved no actual change of beneficial ownership, thereby artificially boosting TRX’s trading volume and fabricating market supply and demand data.
Image: SEC accuses Sun Yuchen of profiting over $31.9 million from illegal TRX sales.
2.3 Celebrity Promotion Allegation
The complaint also accuses Sun Yuchen of orchestrating celebrity promotion campaigns for TRX and BTT tokens, involving eight well-known figures such as Lindsay Lohan, Jake Paul, Akon, and Ne-Yo, who promoted the tokens on social media without disclosing that they received promotional payments. Six of these celebrities have already paid over $400,000 in disgorgement, interest, and civil penalties to the SEC, settling without admitting or denying the allegations. Austin Mahone settled on August 4, 2023, by consent order. Additionally, the SEC filed a voluntary notice of dismissal for pending charges against DeAndre Cortez Way on March 5, 2026.
Analysis of the Dispute’s Resolution: How Did It Reach Settlement?
The nearly three-year-long regulatory lawsuit ultimately settled due to multiple factors, including shifts in SEC enforcement approach, the commercial and legal interests of the involved parties, and policy changes following the U.S. political transition.
3.1 SEC Regulatory Shift
After Trump became U.S. President, the SEC’s approach to crypto regulation and enforcement changed significantly. On January 21, 2025, Acting Chair Mark Uyeda announced the formation of the Crypto Task Force, aiming to establish a comprehensive and clear regulatory framework for digital assets. Subsequently, on February 27, 2025, the SEC withdrew its civil enforcement action against Coinbase; on May 29, 2025, the SEC reached a joint withdrawal agreement with Binance and its former CEO Zhao Changpeng. These actions suggest that the Sun Yuchen case is not isolated but part of a broader pattern of the SEC shifting from aggressive enforcement to regulatory restructuring since 2025.
3.2 Commercial Considerations of the Parties
From the defendants’ perspective, settlement offers tangible benefits. The settlement involves only Rainberry paying a fine, which clears all charges against the defendants, reduces legal risks, and facilitates the future overseas development of the TRON ecosystem—making it a pragmatic choice aligned with their business interests.
3.3 Litigation Process Dynamics
After Trump’s return to the White House in 2025, the SEC and Sun Yuchen’s legal team jointly requested a stay of proceedings, allowing ample time for settlement negotiations. After nearly a year of discussions, both sides reached a targeted settlement on the core issue of wash trading.
3.4 Underlying Context and Background
Many industry observers believe that the SEC’s settlement with Sun Yuchen is closely related to his substantial financial support for Trump’s family’s crypto projects. Reports indicate that Sun Yuchen spent at least $75 million to acquire WLFI tokens linked to the Trump family’s World Liberty Financial. Several Democratic members of the U.S. House of Representatives have pointed out that crypto companies donated at least $85 million to Trump’s re-election campaign, and the SEC’s relaxed enforcement may be connected to these political contributions.
Regulatory Signals and Market Implications
4.1 New Trends in SEC Regulation
This settlement clearly reflects four major trends in SEC crypto regulation under the Trump administration: First, a shift from strict enforcement to flexible regulation; second, settlement has become a key enforcement tool; third, regulatory policies are increasingly aligned with government industry initiatives; and fourth, the SEC is placing greater emphasis on transparent public consultations, written comments, and interpretive guidance to refine the regulatory framework.
4.2 Guidance for Market Participants
For project teams, activities such as artificially inflating trading volume, undisclosed conflicts of interest in promotions, and other potentially misleading market behaviors remain the most likely triggers for regulatory scrutiny.
For crypto exchanges, this case underscores the importance of monitoring trading activity and detecting anomalies. Platforms should establish robust mechanisms for identifying and preventing wash trading and other manipulative behaviors.
For individual investors, wash trading creates false trading volumes, which can mislead investors about liquidity and genuine market demand, posing significant risks.
Conclusion
The settlement of the nearly three-year-long SEC lawsuit with Sun Yuchen and TRON-related entities marks a significant milestone in the evolution of U.S. crypto regulation. From aggressive prosecution to targeted settlement, the SEC’s regulatory approach has notably shifted following the political transition. For the industry, this case does not provide all the answers but serves as a reminder: before the regulatory framework stabilizes, reducing manipulation risks, improving disclosure quality, and strengthening trading surveillance and compliance remain the safest development strategies.
