SEC and Justin Sun Seek Time-Out in Legal Battle—A Settlement in the Works?

Based on reports, the U.S. Securities and Exchange Commission (SEC) and Tron founder Justin Sun have jointly requested a pause in litigation as they explore a potential settlement, according to a February 26, 2025 court filing. The request, submitted in the U.S. District Court for the Southern District of New York, asks Judge Edgardo Ramos to stay the case for at least 60 days, allowing both parties to negotiate a resolution without further legal proceedings.

“A stay would conserve judicial resources and serve the public interest while both sides explore a mutually acceptable resolution,” stated the filing.

The court has not yet ruled on the request, but the move suggests both parties see room for negotiation—a trend seen in previous SEC enforcement cases against crypto firms.

SEC’s Allegations Against Justin Sun & Tron Foundation

The SEC originally filed its lawsuit against Justin Sun in March 2023, alleging multiple securities law violations related to TRON (TRX) and BitTorrent (BTT) tokens.

Key Allegations in the SEC Lawsuit:

• Unregistered Securities Offerings – Sun and his affiliated companies (Tron Foundation, BitTorrent Foundation, Rainberry Inc.) allegedly engaged in the unregistered sale of TRX & BTT.
• Wash Trading – The SEC accused Sun of artificially inflating trading volumes through a practice known as wash trading, in which assets are bought and sold simultaneously to create misleading market activity.
• Undisclosed Celebrity Promotions – The lawsuit claimed Sun paid high-profile celebrities (including Lindsay Lohan and Soulja Boy) to promote TRX & BTT without disclosing their compensation.

While several celebrities later settled with the SEC, paying fines without admitting wrongdoing, Sun has denied the allegations, calling them unfounded and legally flawed.

“The SEC’s case lacks merit, and we will continue to fight against these baseless claims,” Sun’s legal team previously stated.

What Does This Legal Pause Mean?

The timing of the stay request is significant, as it comes while the court was reviewing Sun’s motion to dismiss the lawsuit. Sun’s legal team has argued that the SEC’s claims were legally flawed, and the case should be thrown out.

Potential Implications of the 60-Day Pause:

• If approved, the case would be temporarily frozen, postponing any decision on Sun’s motion to dismiss.
• Settlement discussions would take center stage, potentially resolving the case without further litigation.
• Neither party would be harmed, as court-imposed deadlines remain unaffected.
• A settlement could avoid a lengthy and expensive trial, benefiting both Sun and the SEC.

Legal experts note that settlements are a common outcome in SEC enforcement cases against crypto executives.

“A stay signals that both sides are considering negotiation—this doesn’t guarantee a settlement, but it’s a step toward resolution,” said securities lawyer James Carter.

Could a Settlement Be Imminent?

The SEC has historically favored settlements in high-profile crypto cases, including previous actions against Ripple, Binance, and Coinbase. If an agreement is reached, possible outcomes could include:

• Monetary Penalty – Sun could agree to pay fines without admitting wrongdoing.
• Business Restrictions – Regulatory conditions may be imposed on Tron’s future operations.
• Compliance Measures – Sun and Tron Foundation could be required to implement stricter regulatory practices.

However, a settlement is not guaranteed. If negotiations fail, the case would proceed to litigation, potentially dragging out the legal battle for months or even years.

Advertisement Banner

“Settlements allow for regulatory clarity, but it’s unclear if Sun would agree to any penalties or restrictions,” noted crypto legal analyst Rachel Lin.

Conclusion: A Turning Point in the SEC vs. Justin Sun Case?

The SEC and Justin Sun’s decision to request a stay indicates serious settlement discussions are underway. While no agreement has been finalized, the move suggests that both parties prefer negotiation over prolonged litigation. If a settlement is reached, it could set a precedent for future SEC actions against crypto firms and executives. On the other hand, if talks break down, the case will resume, further shaping the regulatory landscape for digital assets.

With the court’s decision on the stay request pending, all eyes remain on whether Justin Sun and the SEC can strike a deal—or if this legal battle will continue to unfold in court.

The BIT Journal is available around the clock, providing you with updated information about the state of the crypto world. Follow us on Twitter and LinkedIn, and join our Telegram channel.

FAQs

1. Why are Justin Sun and the SEC requesting a pause in the case?

Both parties are seeking a 60-day stay to explore a potential settlement, which could resolve the case without further litigation.

2. What are the main allegations against Justin Sun?

The SEC accuses Sun of unregistered securities offerings, wash trading, and undisclosed celebrity promotions related to TRX and BTT tokens.

3. Does this mean Sun will settle with the SEC?

Not necessarily. Settlement talks are ongoing, but if no agreement is reached, the case will proceed in court.

4. What happens if the stay is approved?

The case will be temporarily frozen, allowing both sides to negotiate. A joint status report will be submitted within 60 days to update the court on the outcome.

Glossary

Wash Trading: A market manipulation tactic where an entity simultaneously buys and sells an asset to create misleading trading volume.

Unregistered Securities Offering: The sale of investment assets (such as tokens) without SEC registration, violating U.S. securities laws.

Settlement Agreement: A legal resolution where both parties agree to specific terms instead of continuing litigation.

Motion to Dismiss: A legal request asking a court to throw out a case, arguing it lacks merit or violates procedural rules.

References

1. U.S. SEC Official Website
2. Tron Network Official Site
3. Bloomberg Crypto
4. Harvard Law Review
5. Southern District of New York Case Records