A New York District Judge has just dealt the Securities and Exchange Commission (SEC) a setback in its case against Tron founder Justin Sun, as the founder works to dismiss the case against him. 

On Aug. 19, United States District Court Judge Edgardo Ramos denied the SEC’s attempt to hamper one of Sun’s main arguments, which he has been using to have the case against him dismissed. 

The recent order stems from a long-running suit from the SEC against Sun and the Tron Foundation in March 2023, alleging that Sun and his companies engaged in the “orchestration of the unregistered offer and sale, manipulative trading, and unlawful touting of crypto asset securities” with regard to Tron ( TRX ) and BitTorrent (BTT) tokens.

Sun and Tron’s defendants asked for a dismissal of the suit in April, saying the SEC has no authority over “foreign digital asset offerings to foreign purchasers on global platforms.”

They raised an argument in their reply brief referencing the “common enterprise” prong of the Howey test.

The SEC tried to bite back by claiming this was a “new argument” in an Aug. 12 letter — asking the judge to either not consider it in Sun’s motion to dismiss or force them to file a “sur-reply” to address the new argument. 

It argued that Sun’s defendants initially only challenged two parts of the Howey test (investment of money and expectation of profits) but not the common enterprise element.

On Aug. 19, Judge Ramos sided with the defendants that no new argument had been introduced. 

“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 denies SEC attempt to hamper Tron’s defense amid dismissal ploy image 0

Signed order denying SEC motion letter. Source: Courtlistener

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The case against Justin Sun and his associated companies is set to continue. 

One of Sun’s main arguments is that the “SEC is not a worldwide regulator,” and its effort to apply US security laws to “predominantly foreign conduct” goes “too far.”

It claims the tokens were sold “entirely overseas” with steps taken to avoid the US market and that the SEC didn’t allege they “were offered or sold initially to any US residents.”

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