The U.S. Securities and Exchange Commission (SEC) has filed a civil lawsuit against the founder of the Tron blockchain-based operating system and companion cryptocurrency token. If Justin Sun fails to respond to this suit, he could be hit with a default judgment.
Default judgments are fairly common in civil court cases. They can be entered for any number of reasons, the most common being a failure to respond by the party being served. When a default judgment is entered, the party against whom it is entered faces a nearly impossible task in trying to appeal.
A Losing Decision
While there are exceptions to the rule, the vast majority of default judgments are entered against defendants who fail to appear in court. As such, a default judgment is also a losing decision for the defendant. The defendant does not lose the case based on its facts or merits. He loses because he fails to participate in court proceedings.
In a default judgment scenario, a judge simply declares that the plaintiff has won by default. This doesn't mean the plaintiff's claims against the defendant are factually accurate. It does not mean that the plaintiff is in the right and the defendant in the wrong. All it means is that the defendant failed to show up.
Judgments Involving Monetary Awards
Most judgments result in some sort of monetary award, even if that only means the defendant having to pay the plaintiff's court costs. But awards can cover a lot more than legal expenses. Monetary awards can also include restitution as well as punitive damages. Whatever an award might cover becomes the financial responsibility of the defendant.
It is not clear if the SEC suit against Sun and Tron includes any substantial financial penalties. We do know that the government seeks to have Sun removed from company leadership and prohibit him from getting involved with any other cryptocurrency firms as an officer, director, or principal owner.
Steps Taken After a Default Judgment
In any civil case, things do not conclude as soon as a judgment is entered. Whether it is a default judgment or one rendered after a full civil trial, the court's decision sets in motion a new round of activities related to enforcement.
Judgment Collectors, a judgment collection agency based in Salt Lake City, UT, says that enforcing a civil judgment is often the hardest part. Judgments take many forms and can include everything from financial penalties to court orders requiring the defendant to cease and desist a particular activity.
The monetary portion of a civil judgment is left to the plaintiff and its legal representatives. So let's assume that Sun loses his case and is forced to pay civil penalties to the SEC. It is up to the SEC to collect payment. The court will not intervene in any of the government’s collection efforts.
As for any actions relating to Sun's activity in the cryptocurrency sector, it would also be up to the SEC to make sure he abides by the court's decision. They would have to determine the best way to prevent him from engaging in activities or taking on roles that are off-limits as a result of the judgment.
Default Judgments Don't Change Anything
The thing about default judgments is that they do not change anything from an enforcement perspective. A default judgment simply recognizes that the defendant failed to participate in the legal system, thereby accepting a judgment by default. Everything else remains the same in terms of a judgment's details and how it is enforced. To the plaintiff, it's a win without having to present a case in court.