Thursday, March 23, 2023

TorrentFreak's Latest News

 

SEC Charges Justin Sun, TRON & BitTorrent Companies With Fraud
Andy Maxwell, 23 Mar 08:36 AM

justinsun1After reporting on all things BitTorrent-related for the 13 years leading up to May 2018, TorrentFreak spotted something out of the ordinary.

BitTorrent Inc., the company founded by BitTorrent inventor Bram Cohen, and the owner of uTorrent, the world's most recognized torrent client, suddenly had a new name. When asked about the change, Rainberry Inc. said it was a "corporate decision" not unlike the Alphabet/Google exercise.

Less than two weeks later, we were able to reveal that TRON founder Justin Sun was planning to buy BitTorrent Inc. Less than a month after that, Sun closed the deal with a reported offer of $140 million.

A shareholder quoted in a TechCrunch report revealed that one of Sun's aims was to use the BitTorrent acquisition to "legitimize" TRON's business.

According to a Securities and Exchange Commission announcement published a few hours ago, the plan failed in at least one key area. Most likely, many, many more.

Fraud: SEC Charges Justin Sun and Three Wholly-Owned Companies

Claims that the SEC had already opened an investigation into Sun's business activities have been around for a long time. An extraordinary article written by Christopher Harland-Dunaway and published by The Verge last year left very little doubt.

In an announcement Wednesday, the SEC revealed charges against Justin Sun and three of his wholly-owned companies – Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc. (formerly BitTorrent Inc.) – for the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT).

Sun and his companies were further charged with fraudulently manipulating the secondary market for TRX through extensive wash trading, described by the SEC as "simultaneous or near-simultaneous purchase and sale of a security to make it appear actively traded without an actual change in beneficial ownership."

Alleged Crypto-Shill Celebrities

The SEC also charged eight celebrities for promoting TRX and/or BTT without disclosing they were being paid to do so.

Actress Lindsay Lohan, YouTuber/Boxer Jake Paul, DeAndre Cortez Way (Soulja Boy), and singer/songwriter Austin Mahone, are joined by porn actress Michele Mason (aka Kendra Lust), Miles Parks McCollum (Lil Yachty), Shaffer Smith (Ne-Yo) and Aliaune Thiam (Akon) on the SEC's list.

Sun's personal promotion site before it went offline (hejustinsun.com)crypto-diplomat

The SEC's complaint alleges that Sun and his companies sold TRX and BTT as investments via unregistered "bounty programs" that saw partners promote the tokens on social media while recruiting others to join Tron-affiliated Telegram and Discord channels.

Sun, BitTorrent Foundation, and Rainberry reportedly sold BTT in unregistered monthly airdrops to investors who purchased and held TRX in Tron wallets or on other crypto trading platforms. The SEC says that every offer and sale violated Section 5 of the Securities Act.

Fraud and Market Manipulation

The SEC alleges that Sun was also the architect of a scheme that sought to artificially inflate the volume of TRX on the secondary market.

During a 10-month period 2018/2019, Sun allegedly directed his employees "to engage in more than 600,000 wash trades of TRX between two crypto asset trading platform accounts [Sun] controlled, with between 4.5 million and 7.4 million TRX wash traded daily."

Sun's personal promotion site today (hejustinsun.com)messeduphomepage

Sun is said to have supplied a significant amount of TRX to facilitate the scheme while also selling TRX into the secondary market himself. These "illegal, unregistered offers and sales" reportedly generated $31 million.

Sun's Stunts Slammed by SEC

"While we're neutral about the technologies at issue, we're anything but neutral when it comes to investor protection," said Gurbir S. Grewal, Director of the SEC's Division of Enforcement.

"As alleged in the complaint, Sun and others used an age-old playbook to mislead and harm investors by first offering securities without complying with registration and disclosure requirements and then manipulating the market for those very securities.

"At the same time, Sun paid celebrities with millions of social media followers to tout the unregistered offerings, while specifically directing that they not disclose their compensation."

According to the SEC, six of those celebrities have already paid their way out. Lohan, Paul, Lust, McCollum, Smith, and Thiam agreed to hand over a combined $400,000 in settlements for their alleged roles in a magic bean business we called out almost four years ago.

From: TF, for the latest news on copyright battles, piracy and more.

BREIN Won't Take Piracy Warning Dispute to The Supreme Court
Ernesto Van der Sar, 22 Mar 09:28 PM

cautionDutch anti-piracy group BREIN has been at the forefront of the anti-piracy battle since the turn of the millennium.

For most of this period, unauthorized sharing via BitTorrent has been a prime concern. Traditionally, BREIN focused its enforcement efforts on website operators, but in recent years there's been a shift to uploaders as well.

In late 2020, the anti-piracy group announced an elaborate program to monitor and warn some of the most active BitTorrent uploaders. The goal of this "FLU" scheme was to change the behavior of prolific pirates, without obtaining their identities.

The project received government research funding but BREIN had a major obstacle to overcome. Unlike ISPs in other countries such as the United States, Dutch ISPs are not required to forward piracy notices to their subscribers.

ISP Refuses to Forward Warnings

BREIN hoped that Internet providers would be willing to cooperate, but that wasn't to be the case. When BREIN approached Ziggo, the largest ISP in the Netherlands, with a request to forward piracy alerts to its subscribers, the company refused to do so.

According to Ziggo, linking IP addresses to specific subscribers raises serious privacy concerns, even if personal information isn't shared with BREIN.

The anti-piracy group was unhappy with the refusal and took Ziggo to court. BREIN argued that warnings are a relatively mild measure that would help rightsholders to address the piracy problem. The system wouldn't result in any claims for damages either, as the identities of the alleged pirates would remain private.

BREIN lost the case last year. The court found that there is no legal basis to compel Ziggo to forward warnings. In addition, the ISP lacks a license to link IP-addresses to personal information.

This outcome was a disappointment for BREIN which appealed the ruling, but without result. The appeals court affirmed the lower court's ruling, noting that there is no legal basis to require Internet providers to forward the notices.

No Supreme Court Challenge

This was yet another setback for the anti-piracy group, which considered taking the matter to the Supreme Court. However, after weighing the available options, it chose not to do so, which effectively means the end of the original FLU program.

In its most recent annual report, the group cites the 'costs' as the primary reason not to appeal the matter to the highest court.

"In light of the costs, BREIN decided not to appeal at the Supreme Court," BREIN writes. "We don't rule out that the FLU project will be adapted to the conventional form of enforcement. In that case, a claim will be filed if the summons is not heeded."

Having spent years developing its piracy monitoring plan, BREIN leaving the door open for a revised warning scheme is to be expected. Aside from the technical investments, BREIN was also required to obtain a data processing license. Ideally, it would like to put that to use.

Piracy Fines Are on the Table Now

BREIN typically takes a pragmatic and reasonable approach. This was exemplified by its original plan to alert or warn prolific uploaders, without having to obtain their identities. Ironically, this benign approach must now be reconsidered after the court determined there is no legal basis to compel ISPs to forward warnings.

"We think anonymous warnings are a form of enforcement but Ziggo didn't want to do it," BREIN director Tim Kuik tells TorrentFreak.

"The appeal court said we need to be able to bring a claim to court if there is no compliance. So we will consider adapting the FLU protocol to that. A claim could be a cease-and-desist undertaking with a fine in case of recidivism."

In other words, BREIN is considering whether to file more concrete claims against prolific uploaders because that's the only way they can be approached. In that case, the alleged offenders will be identified, facing a potential fine for their wrongdoing.

Open Directory Case Pending

At the moment it remains unclear what type of claim is sufficient. In a related case, the court previously decided that Ziggo didn't have to forward a notice or disclose the identity of a subscriber who shared 200 pirated ebooks in an open directory.

This open directory case does involve a claim, BREIN contends, and the case is currently under appeal. The decision on this matter is expected in a few weeks and could provide more clarity.

BREIN will likely await the ruling in the open directory case before it takes any further decision regarding the future of the BitTorrent uploader warnings. In the meantime, its other enforcement actions will continue, of course.

From: TF, for the latest news on copyright battles, piracy and more.

 
 
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