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Good day, hello, here we are — another beautiful Thursday in the cryptoverse, coming at you fast with the biggest stories in Web3. This is Tokengraph, the newsletter with Solana-level speeds (without Solana-level outages).
On the agenda today…
The SEC Is Coming After Tron + Celebs
Coinbase Served Wells Notice by SEC
Cathie Woods Sells Coinbase Stock
SEC also Subpoenas SushiSwap?
Card Battler Reborn as Web3 Game
The SEC has just announced its newest crypto-related target, and it’s looking messy. They’re going after Justin Sun, the founder of TRON, and also all of the celebrities who have promoted its token without disclosing their payment.
The SEC has accused $TRX, Tron, founder Justin Sun of market manipulation.
He allegedly artificially inflated the trading volume of $TRX in the secondary market by telling employees to "engage in more than 600,000 wash trades of TRX"
— unusual_whales (@unusual_whales)
Mar 22, 2023
TRON is a layer 1 blockchain that uses TRX, its native cryptocurrency, to power programs running on its network — and it’s that very currency that the SEC is honing in on with its charges. Justin Sun has been hit with charges of fraud, market manipulation, and giving investors unregistered securities (read: TRX).
The SEC is also suing two other companies owned by Sun, BitTorrent and Rainberry, for the same reasons.
Justin Sun was sued today by the SEC for selling unregistered securities, fraud, and market manipulation of BTT (BitTorrent token) and TRX (Tron).
Lindsay Lohan, Jake Paul, Soulja Boy, Lil Yachty, Ne-Yo, Akon and Michele Mason were all sued by the SEC today for promoting these… twitter.com/i/web/status/1…
— Pledditor (@Pledditor)
Mar 22, 2023
Here’s the current list of celebrities who are being sued for promoting TRON without disclosing their compensation:
Jake Paul, influencer and boxer
Lindsay Lohan, actress
Soulja Boy, hip hop artist
Lil Yachty, hip hop artist
Ne-Yo, R&B artist
Akon, hip hop artist
Michele Mason, adult film actress
And the market manipulation charges against Sun are quite serious: the suit claims that the manipulation happened from April 2018 – February 2019, and that Sun had employees execute 600K TRX wash trades that led to massively inflated prices, leading to $31 million in gains.
I want to make it clear: I have no enemies. #TRON's mission is to create a better, more decentralized world for all 8 billion people on earth - even those who oppose us. We are steadfast in pursuing our dream, not because it's profitable, but because it's the right thing to do.
— H.E. Justin Sun 孙宇晨 (@justinsuntron)
Mar 23, 2023
Sun has tweeted out a response to the charges, stating that he has “no enemies” and that TRON is focused only on building a better world, implying that he and his company aren’t concerned with the lawsuit.
🚨 also a reminder that:
1. Overwhelming majority of USDT was printed after #JustinSun joined the #Tether team
2. Currently 55% of all the Tether in the world - $43 bn - lives on #TronNetwork, which is the blockchain owned by #JustinSun
3. 95%+ of USDT on #Tron went to... #SBF
— ⚯ M Cryptadamus ⚯ | @[email protected] (@Cryptadamist)
Mar 22, 2023
Tron’s price has dipped by 11.6% in the past day in reaction to the news. This moment in crypto history is reminding us of when the SEC sued Kim Kardashian for unlawfully advertising for Emax — she ended up paying $1.26M in fines, but this could be far more serious for Justin Sun.
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Next up is the SEC’s other regulatory battle, a fight that it’s picked with one of crypto’s biggest exchanges: Coinbase.
The SEC served Coinbase a Wells notice yesterday, which is like the government’s way of telling an organization “Hey, we’re probably going to bring some charges against you soon.”
This came as a shock and a disappointment to both users and management of the firm, as Coinbase had apparently been in talks with the SEC “to build a path to registration,” according to Paul Grewal, Coinbase’s Chief Legal Officer — but then this Wells notice came out of nowhere, and it seems those talks were all for nothing.
Brian Armstrong, Coinbase’s CEO, made a great analogy about the situation in response to a Twitter user who asked for an explanation of the situation in NFL terms. He compared it to playing pickleball with football and soccer referees on the field:
Imagine you've got both football and soccer refs on the field, but we're actually playing pickleball (fastest growing new sport in America). The refs can't really agree on the rules of this new game, and one of them decides to change a call they made back in April 2021.
— Brian Armstrong (@brian_armstrong)
Mar 22, 2023
One positive outcome of the situation has been an outpouring of support for Coinbase within the Web3 community and a seeming unification of the public against the way the SEC is handling regulations currently. Where companies like Coinbase have been more than willing to discuss and reach solutions together, the SEC has chosen to enforce and sue.
SEC (April 2021): "Go right ahead and issue stock to the American public @coinbase, we approve of $COIN's business lines and disclosures"
SEC (March 2023): "We are suing you @coinbase for the exact business lines and disclosures we approved prior to your listing of US shares"
— Mike Dudas (@mdudas)
Mar 22, 2023
Oh PS - if Coinbase does indeed choose to fight the SEC as they are saying they will, then I'm:
-Moving all my purchases to Coinbase
-Moving all my trading to Coinbase
-Delegating to Coinbase staking nodes
If they go to bat for this industry, I'll vote with my wallet.
— Adam Cochran (adamscochran.eth) (@adamscochran)
Mar 22, 2023
Paul Grewal summed up the situation in a Twitter thread yesterday: “The truth is that today there is no clear rule book from the SEC on crypto, and efforts to engage with the SEC are met with silence or enforcement actions. They have not followed a good faith rulemaking process with the industry, as required under the APA.”
How can companies comply with regulations when the SEC won’t tell them the rules that they need to play by — it just keeps suing them? Is the future of crypto simply meant to be away from US soil, or will the US government make room for it?
According to Cornerstone Research, which of the following facts about the SEC’s regulatory actions regarding crypto is accurate (as of Dec 2022)?
A. It has brought 127 total enforcement actions against cryptoB. The SEC announced it was doubling the size of its crypto unitC. It broke its own regulatory enforcement action record in 2022B. All of the above
Scroll down to the bottom to see if you're right!
Other Top Stories Today 📢
Cathie Woods has made headlines all year for her company’s consistent purchases of Coinbase stock — but today, she’s making headlines for selling. ARK sold 9% of its COIN holdings purchased this year for roughly $13.5M, cashing in on the stock’s recent rapid rise in price and taking some profits. COIN has increased in price by more than 130% this year alone, and ARK still holds 1.6M shares in total.
Wow, the SEC sure has been busy this week. Coinbase, Jake Paul, TRON, and now SushiSwap. Call us crazy, but it almost seems as though it’s on a mission to get crypto out of the US entirely…
Sushi, the creator of SushiSwap, a decentralized exchange, announced on Tuesday that it had been served a subpoena by the SEC, ordering it to appear in court. Sushi also submitted a proposal to its DAO, asking for a $3M fund to cover potential legal costs. Sushi DAO member Miohtama commented that “The SEC will go for easy victories and the easiest is to grab anyone on the US soil. The simplest solution would be to make sure that Sushi DAO does not have anyone from the US involved from now on.”
Shardbound, a previously successful but now relatively dead card game on Steam, is getting the Web3 treatment — Immutable Games and Bazooka Tango are turning it into a blockchain game through Immutable zkEVM. The plan is simple — they’re going to give the game new developmental funding and add NFT elements in the hopes that this brings old players back and adds new ones to the ranks.
❓ Trivia Answer
All three of the statistics and facts about the SEC are true — 2022 saw it wage a new level of regulatory war on the crypto space, and it looks like 2023 will be even more intense!
Web3 Resource of the Day
Ray Dalio's Warning for the Economic Crisis and U.S. Recession | Video from New Money
We’re taking a moment to zoom out from the crypto industry and to look at the economy as a whole with our resource of the day today. Ray Dalio, billionaire and hedge fund manager, believes that we’re not only in a recession right now, but that it’s going to get significantly worse. New Money has a great breakdown on Dalio’s most important and alarming opinions here, including what he believes is the biggest economic problem we are facing currently.
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DISCLAIMER: This is not financial advice. This newsletter is strictly educational and is not investment advice to buy or sell any assets or to make any financial decisions. Do your own research.