The Securities and Exchange Commission has announced that TrueCoin LLC and TrustToken Inc. have settled charges related to fraudulent and unregistered sales of investment contracts tied to TrueUSD (TUSD), a stablecoin. The SEC’s complaint, filed in the U.S. District Court for the Northern District of California, accuses TrueCoin, the issuer of TUSD, and TrustToken, the developer of the TrueFi lending protocol, of misleading investors about the safety and backing of TUSD from November 2020 to April 2023.

According to the complaint, TrueCoin and TrustToken marketed TUSD as being fully backed by U.S. dollars. However, they had invested a significant portion of the assets meant to back TUSD in a speculative offshore fund. By March 2022, more than $500 million of TUSD’s backing was invested in this fund. Despite becoming aware of redemption issues with the fund by Fall 2022, TrueCoin and TrustToken continued to falsely claim that TUSD was backed one-for-one by U.S. dollars. By September 2024, 99% of TUSD’s reserves were tied up in the risky fund.

The SEC emphasized that the companies misled investors, exposing them to significant risks. Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets & Cyber Unit, stated, “This case underscores the importance of registration, as investors lacked the crucial information to make informed decisions.”

Without admitting or denying the charges, TrueCoin and TrustToken agreed to settle by paying civil penalties of $163,766 each. TrueCoin will also pay $340,930 in disgorgement and $31,538 in prejudgment interest. The settlements are pending court approval, and the SEC’s investigation remains ongoing.

Resources:

SEC.GOV