The US Securities and Exchange Commission (SEC) has charged TrueCoin and TrustToken with fraudulent and unregistered sales of investment contracts involving the TrueUSD (TUSD) stablecoin, and lying about its backing, according to a Sept. 24 statement.
TrueCoin and TrustToken agreed to settle the SEC’s charges without admitting or denying fault. They also consented to injunctions and $163,766 civil penalties each. TrueCoin will pay an additional $340,930 in disgorgement plus $31,538 in interest, pending court approval.
SEC complaint
The SEC’s complaint alleged that TrueCoin and TrustToken reportedly marketed TUSD as fully backed by US dollars or equivalents while a substantial portion was invested in a risky offshore fund.
By March 2022, over half a billion dollars of TUSD-backing assets were invested in the speculative fund. Despite awareness of redemption issues by the Fall of 2022, the companies continued to misrepresent TUSD as one-to-one dollar-backed.
The regulator stated that 99% of TUSD reserves were in the speculative fund as of September 2024. It added that both entities mismanaged investors’ funds by searching for profits for themselves, which exposed users to “substantial, undisclosed risks through misrepresentations about the safety of the investment.”
Additionally, the SEC highlighted that from November 2020 to April 2023, the companies engaged in unregistered offers and sales of TUSD investment contracts and profit-making opportunities on TrueFi, a decentralized money market where users can lend stablecoins as credit lines to companies to earn interest.
TrueUSD currently has a market cap of nearly $494 million and is experiencing a slight de-peg following the news.