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Cryptocurrency News Articles
SEC Settles With TrueUSD Issuer TrueCoin and Lending Protocol Operator TrustToken Over Alleged Fraudulent Sale of Unregistered Investment Contracts
Sep 27, 2024 at 02:45 am
Federal securities regulators have reached an agreement with TrueUSD (TUSD) issuer TrueCoin and lending protocol operator TrustToken to settle charges for the alleged
The Securities and Exchange Commission on Friday charged TrueCoin and TrustToken with offering and selling TrueUSD (TUSD) as an unregistered investment contract.
According to the SEC, TrueCoin, a Cayman Islands company, is the issuer of TUSD, a stablecoin that is pegged to the U.S. dollar. TrustToken, also based in the Cayman Islands, operates a lending protocol and is alleged to have played a role in the offering and sale of TUSD.
The SEC alleges that from November 2020 to April 2023, TrueCoin and TrustToken offered and sold TUSD as an unregistered security. The regulator claims that while TrueCoin and TrustToken touted that TUSD was fully backed by the U.S. dollar on a one-to-one basis, a substantial portion of the assets that were purportedly backing TUSD were instead invested in a speculative and risky offshore investment fund to generate more earnings.
The SEC alleges that TrueCoin and TrustToken became aware of redemption problems at the offshore fund in 2022, but they continued making claims that TUSD was backed one-for-one by the U.S. dollar.
By March 2022, more than half a billion dollars of the assets that were supposed to be backing TUSD were invested in the speculative fund. By September 2024, 99% of the reserves that were supposed to be backing the stablecoin were already invested in the offshore fund, according to the SEC.
TrueCoin and TrustToken agreed to settle the SEC’s charges without admitting or denying the allegations, according to a statement from the regulator. However, the settlements are still subject to court approval.
“TrueCoin and TrustToken have agreed to settle the SEC’s charges by consenting to the entry of final judgments enjoining them from violating applicable provisions of the federal securities laws and to pay civil penalties of $163,766 each. TrueCoin has agreed to pay disgorgement of $340,930 with prejudgment interest of $31,538.”
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