SEC Charges TrueCoin and TrustToken for Fraudulent TrueUSD Claims
The US Securities and Exchange Commission (SEC) recently announced charges against TrueCoin and TrustToken for fraudulent and unregistered sales of investment contracts involving the TrueUSD (TUSD) stablecoin. The companies were accused of misrepresenting the backing of TUSD, claiming it was fully supported by US dollars or equivalents when, in reality, a significant portion was invested in a risky offshore fund.
Settlement with Civil Penalties
TrueCoin and TrustToken have agreed to settle the SEC’s charges without admitting or denying fault. As part of the settlement, both companies will pay $163,766 in civil penalties each. In addition to the penalties, TrueCoin will also pay $340,930 in disgorgement and $31,538 in interest, pending court approval. The settlement includes injunctions against further fraudulent activities by the companies.
Allegations of Mismanagement and Misrepresentation
The SEC’s complaint alleged that TrueCoin and TrustToken continued to market TUSD as one-to-one dollar-backed despite being aware of redemption issues as early as the Fall of 2022. By March 2022, over half a billion dollars of TUSD-backing assets were invested in the speculative fund, representing a significant risk to investors.
The regulator further stated that as of September 2024, 99% of TUSD reserves were held in the speculative fund, highlighting the mismanagement of investors’ funds by TrueCoin and TrustToken. The companies’ actions exposed users to substantial, undisclosed risks through misrepresentations about the safety of the investment.
Unregistered Offers and Sales
In addition to the fraudulent marketing of TUSD, the SEC also found that TrueCoin and TrustToken engaged in unregistered offers and sales of TUSD investment contracts and profit-making opportunities on TrueFi, a decentralized money market platform. This allowed users to lend stablecoins as credit lines to companies in exchange for interest, further complicating the regulatory violations.
TrueUSD, currently with a market cap of nearly $494 million, has experienced a slight de-peg following the news of the SEC charges and settlement with TrueCoin and TrustToken. The market impact of these developments remains to be seen as investors assess the implications of the regulatory actions.
The settlement with the SEC marks a significant development in the cryptocurrency industry, highlighting the importance of transparency and regulatory compliance in the issuance and marketing of digital assets. TrueCoin and TrustToken’s case serves as a cautionary tale for other companies operating in the space, emphasizing the consequences of misleading investors and misrepresenting asset backing.
In conclusion, the SEC’s charges and settlement with TrueCoin and TrustToken underscore the regulatory scrutiny facing the cryptocurrency market and the need for companies to adhere to strict compliance standards when issuing and marketing digital assets. The case serves as a reminder of the consequences of fraudulent practices in the industry and the importance of maintaining investor trust and confidence through transparent and accountable operations.
