TrustToken and TrueCoin, the entities behind the TrueUSD (TUSD) stablecoin, last week reached a settlement with the US Securities and Exchange Commission (SEC) over allegations of fraudulent and unregistered sales of investment contracts.
The companies have agreed to pay a combined total of $700,000 in penalties and disgorgement without admitting or denying the SEC’s findings.
Per an exclusive statement to CryptoSlate from the TrustToken and TrueCoin teams,
“TrustToken and TrueCoin have agreed to a no-admit/no-deny settlement with the US Securities and Exchange Commission, resolving an investigation related to TrueUSD and TrueFi.
While we were prepared to defend our position, we ultimately decided that avoiding the burden and distraction of litigation is in our best interest, allowing us to focus on the exciting business opportunities ahead.”
The SEC’s complaint, filed in the US District Court for the Northern District of California, alleged that from November 2020 to April 2023, TrueCoin and TrustToken engaged in unregistered offers and sales of TUSD as investment contracts through their TrueFi lending protocol. The regulator claimed that the companies falsely marketed TUSD as fully backed by US dollars or equivalents, while a substantial portion of the assets were invested in a speculative offshore fund.
According to the SEC, by March 2022, over half a billion dollars of TUSD-backing assets were invested in the speculative fund. The complaint further alleged that by September 2024, 99% of the reserves backing TUSD were invested in this fund, exposing investors to substantial, undisclosed risks.
Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets & Cyber Unit, emphasized the importance of registration in protecting investors. “This case is a prime example of why registration matters, as investors in these products continue to be deprived of the key information needed to make fully informed decisions,” Tenreiro stated.
As part of the settlement, TrueCoin and TrustToken each agreed to pay civil penalties of $163,766. Additionally, TrueCoin will pay $340,930 in disgorgement plus $31,538 in prejudgment interest. Both companies have consented to injunctions preventing them from future violations of federal securities laws.
The settlement comes amid increased regulatory scrutiny of the crypto sector. In 2024, the SEC reportedly collected a record $4.68 billion in fines from the crypto sector, up from $3.9 billion in 2023.
Following the news of the settlement, TrueUSD experienced a slight de-peg, with its market cap standing at nearly $494 million at the time of the report, now up to $495 million. The peg climbed back over $0.999 on Sept. 27 but has since again dropped to $0.98 over the past 24 hours. However, the current level is within ranges seen over the past six months.