The US Securities and Exchange Commission (SEC) and crypto entrepreneur Justin Sun have jointly moved to pause their legal battle as they explore a potential settlement, according to a court filing submitted on Feb. 26.

The request, filed in the US District Court for the Southern District of New York, asks Judge Edgardo Ramos to stay the case for at least 60 days.

The SEC and Sun’s legal team stated that a pause would allow them to negotiate a resolution without the need for further litigation, which they argued would benefit the court and the public by conserving judicial resources.

The court has yet to rule on the request.

SEC allegations

The SEC filed its lawsuit against Sun in March 2023, accusing the founder of Tron and his affiliated companies — Tron Foundation, BitTorrent Foundation, and Rainberry, Inc. — of engaging in the unregistered offering and sale of securities through the distribution of TRON (TRX) and BitTorrent (BTT) tokens.

The agency also alleged that Sun engaged in “wash trading,” a practice where an entity simultaneously buys and sells the same asset to create misleading market activity and inflate trading volume for TRX.

Additionally, the SEC’s complaint included allegations that Sun paid celebrities, including actress Lindsay Lohan and rapper Soulja Boy, to promote TRX and BTT without disclosing that they were compensated for their endorsements.

Several of the celebrities later settled with the SEC, agreeing to pay fines without admitting wrongdoing.

Potential impact

The request to stay the case comes as the court was considering Sun’s motion to dismiss the lawsuit.

Sun’s legal team had argued that the SEC’s claims were legally flawed and that the case should be thrown out. If Judge Ramos grants the stay, the court would delay any ruling on that motion while discussions continue.

Both the SEC and Sun’s attorneys emphasized that the delay would harm no party, including non-parties, and that court-imposed deadlines would not be affected.  The filing also stated that the parties would submit a joint status report within 60 days to update the court on whether a settlement had been reached or if the case would proceed.

A stay in the case could signal that both sides see room for negotiation, as settlements have been a common resolution in similar SEC enforcement actions against crypto firms and executives.  However, no agreement has been finalized, and it remains unclear whether Sun would admit to any wrongdoing as part of a potential resolution.

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