By Jonathan Stempel
NEW YORK (Reuters) - The U.S. Securities and Exchange Commission is exploring a resolution to its closely followed civil fraud case against Justin Sun, the Chinese cryptocurrency entrepreneur and adviser to a crypto project backed by U.S. President Donald Trump.
In a Wednesday letter to U.S. District Judge Edgardo Ramos in Manhattan, lawyers for Sun and the SEC asked that the case be put on hold, citing the interests of both sides and the public. They proposed submitting a status report 60 days after a stay.
Sun's lawyers did not immediately respond to requests for comment. The SEC declined to comment. It is unclear whether a resolution would involve a settlement or a dismissal.
The SEC sued Sun and his companies Tron Foundation, BitTorrent Foundation and Rainberry in March 2023.
It accused them of scheming to illegally distribute the crypto assets Tronix and BitTorrent, artificially inflate trading volume, and conceal payments to celebrity endorsers.
Trump has pledged to make the United States a global hub for the cryptocurrency industry and nominated Paul Atkins, a Washington lawyer seen as supportive of digital assets, to become SEC chair.
Gary Gensler, the SEC chair when Sun's case was brought, drew much industry opposition for favoring greater cryptocurrency regulation.
The SEC said Sun's alleged scheme began in August 2017.
According to court papers, Sun illegally generated $31 million of proceeds by ordering employees to conduct hundreds of thousands of Tronix trades between two accounts he controlled, creating a false and misleading sense of legitimate trading.
Sun, 34, was also accused of retaining celebrities like actress Lindsay Lohan, singers Akon and Ne-Yo and social media personality Jake Paul to promote Tronix and BitTorrent on social media, while concealing they were paid for their efforts.
SUN'S ENDEAVORS
More recently, Sun has become perhaps the most prominent buyer of the World Liberty Financial token that Trump partially owns, spending at least $75 million according to posts on social media platform X. Sun is a World Liberty adviser.
Those purchases, involving an entity where Trump benefits financially, have raised concerns about potential conflicts of interest.
While the SEC's possibly backing off Sun's case "may be good for one of the president's crypto partners, it's bad for the industry's already questionable reputation," said Corey Frayer, a former policy adviser to Gensler.
Sun also drew wide attention in the art world in November, when he paid $6.2 million at a Sotheby's auction for a work consisting of a banana attached to a wall by duct tape.