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Cryptocurrency News Articles
TrueUSD Issuers TrustToken and TrueCoin Settle With SEC for $700K Over Stablecoin Fraud Allegations
Sep 25, 2024 at 05:27 pm
By the fall of 2022, TrueCoin and TrustToken became aware of redemption problems at the commodity fund, the complaint continues.
TrustToken and TrueCoin have settled with the US Securities and Exchange Commission (SEC) over allegations that they misled investors about the backing of stablecoin TrueUSD (TUSD).
The SEC filed a complaint on Tuesday, accusing the firms of sending TUSD’s dollar backing to “a speculative and risky offshore commodity fund.” After TrueUSD was acquired by Techteryx in late 2020, TrueCoin remained involved in the stablecoin’s operations until July 2023, according to the SEC. During that time, the firms allegedly continued to insist that TUSD was backed “one-for-one by US dollars.”
The settlement does not include TrueCoin and TrustToken admitting or denying the allegations in the complaint.
“By the fall of 2022, TrueCoin and TrustToken became aware of redemption problems at the commodity fund,” the complaint states. But despite becoming aware of these issues, the firms continued to represent TUSD as “backed dollar-for-dollar.”
TrueCoin also allegedly received “a portion of the interest earned on the TUSD reserves” from Techteryx.
The fund was reportedly investing in a Hong Kong trust, which put money into “trade finance, structured trade, export finance, import finance, supply chain financing, and project financing of entities.” A memorandum for this fund noted that it was “speculative” and stated that it was only suitable for those who could “bear the risk of losing most or all of their investment.”
By September 2024, “more than 99% of the assets backing TUSD were invested in the risky Commodity Fund.” The fund was apparently provided by First Digital Trust in Hong Kong, a long-time TrueUSD partner.
In the attestations for TrueUSD, funds held at First Digital Trust are currently described as being invested “in other instruments to generate yield, which are made up of investments that may not be readily convertible to cash, subject to market conditions or fund performance.”
As part of the settlement with the SEC, TrueCoin and TrustToken have agreed to pay $163,766 in civil penalties each. TrueCoin has also agreed to $340,930 disgorgement with a prejudgment interest of $31,538.
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