TrustToken and TrueCoin, the entities behind the TrueUSD (TUSD) stablecoin, reached a settlement with the U.S. Securities and Exchange Commission (SEC) last week over allegations of fraudulent and unregistered sales of investment contracts.
The companies have agreed to pay a total of $700,000 in fines and disgorgement without admitting or denying the SEC’s findings.
According to 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 U.S. Securities and Exchange Commission, resolving an investigation involving TrueUSD and TrueFi.
While we were prepared to defend our position, we have ultimately decided that avoiding the burden and distraction of litigation is in our best interests so that we can focus on the exciting business opportunities ahead.”
The SEC’s complaint, filed in the U.S. District Court for the Northern District of California, alleged that between November 2020 and April 2023, TrueCoin and TrustToken engaged in unregistered offers and sales of TUSD as investment contracts through their TrueFi lending protocol. The regulator alleged that the companies falsely marketed TUSD as fully backed by US dollars or equivalents, while a significant portion of the assets were invested in a speculative offshore fund.
More than half a billion dollars in TUSD-backing assets had been invested in the speculative fund as of March 2022, according to the SEC. The complaint further alleged that as of September 2024, 99% of the reserves backing TUSD were invested in this fund, exposing investors to significant, undisclosed risks.
Jorge G. Tenreiro, acting head of the SEC’s Crypto Assets & Cyber Unit, emphasized the importance of registration in protecting investors. “This case is a good example of why registration is important, as investors in these products are still deprived of the key information needed to make fully informed decisions,” Tenreiro said.
As part of the settlement, TrueCoin and TrustToken each agreed to pay civil penalties of $163,766. In addition, TrueCoin will pay $340,930 in payout plus $31,538 in prejudgment interest. Both companies have agreed to court orders preventing them from future violations of federal securities laws.
The settlement comes amid increased 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 news of the settlement, TrueUSD experienced a slight decoupling, with its market cap at nearly $494 million at the time of the report, now up to $495 million. The peg climbed back above $0.999 on September 27, but has since fallen again to $0.98 in the past 24 hours. However, the current level is within the range of the past six months.