US SEC Charges TrueCoin, TrustToken for Stablecoin Investment Program

The United States Securities and Exchange Commission (SEC) filed charges against two crypto companies, TrueCoin and TrustToken, for their fraudulent investment scheme in stablecoins and the unregistered offering and sale of securities.

According to a press release from the agency, the SEC filed the complaint in the United States District Court for the Northern District of California and has settled the charges against the companies, ordering them to pay a collective penalty of 700,000 dollars

The SEC charges TrueCoin and TrustToken

TrustToken is the developer of the TrueFi lending protocol in which TrueCoin issued the TrueUSD (TUSD) stablecoin. The entities launched TUSD in 2018; the SEC accused them of engaging in the unregistered offering and sale of profit opportunities and investment contracts in the form of stable currency from November 2020 to April 2023.

TrustToken claims that TUSD is the first USD-pegged stablecoin to publish daily certifications of its underlying reserves by independent third-party institutions, but the SEC complaint says otherwise.

The agency alleged that TrustToken and TrueCoin falsely promoted the TUSD as an asset fully backed by US dollars (USD), while a large portion of the funds backing the token had been invested in a speculative scheme. The operators of the TrueFi protocol used the USD intended to back TUSD to bet on a risky offshore investment fund in an attempt to gain additional returns.

When the creators of TrueFi sold TUSD operations to an offshore company in March 2022, they had invested more than $500 million of the funds intended to support the stablecoin. Unfortunately, TrustToken and TrueCoin discovered redemption issues in the offshore fund later that year. Yet they continued to mislead TUSD investors with false statements about the stablecoin being backed 1:1 by the USD.

The SEC stated that TrustToken and TrueCoin had invested 99% of the reserves backing TUSD into the venture fund by September 2024.

TrueCoin and TrustToken are settled with SEC

The crypto companies have settled with the SEC and agreed to pay civil penalties, disgorgement and prejudgment interest.

“This case is an excellent example of why registration is important, as investors in these products continue to be deprived of the key information needed to make fully informed decisions,” said Acting Head of the SEC’s Crypto Assets and Cyber, Jorge Tenreiro.

Meanwhile, some crypto projects, such as decentralized exchange Curve Finance, are considering removing TUSD from their list of collateral tokens following the SEC indictment.

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