The US Securities and Exchange Commission (SEC) has accused TrueCoin and TrustToken of fraudulent and unregistered sales of investment contracts related to the TrueUSD (TUSD) stablecoin, and lying about its backing, according to a September 24 statement.
TrueCoin and TrustToken agreed to settle the SEC’s charges without admitting or denying guilt. They also agreed to injunctions and civil penalties of $163,766. TrueCoin will pay an additional $340,930 in payout plus $31,538 in interest, pending court approval.
SEC complaint
The SEC’s complaint alleged that TrueCoin and TrustToken allegedly marketed TUSD as fully backed by US dollars or equivalents, while a significant portion was invested in a risky offshore fund.
As of March 2022, more than half a billion dollars in TUSD-backed assets had been invested in the speculative fund. Despite realizing repayment issues in the fall of 2022, companies continued to misrepresent TUSD as one-for-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 seeking profits for themselves, exposing users to “substantial, undisclosed risks from misrepresentations about the safety of the investment.”
Additionally, the SEC highlighted that between November 2020 and April 2023, the companies engaged in unregistered offers and sales of TUSD investment contracts and profit opportunities on TrueFi, a decentralized money market where users can lend stablecoins as lines of credit to companies to earn interest. .
TrueUSD currently has a market cap of almost $494 million and is experiencing a slight de-peg due to the news.