US SEC Charges TrueUSD Stablecoin Backers With $700K Penalty

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Sujha Sundararajan

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Sujha Sundararajan

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September 25, 2024

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The US Securities and Exchange Commission (SEC) has settled with TrueCoin and TrustToken, the companies behind TrueUSD stablecoin, for $700,000.

The official release noted that the affiliated backers of the TrueUSD (TUSD) stablecoin allegedly misrepresented the token’s stability, defrauding investors.

Per the complaint filed in the U.S. District Court for the Northern District of California, TrueCoin and TrustToken engaged in the unregistered offer and sale of investment contracts in the form of the crypto asset TUSD. They were also involved in “profit-making opportunities” with respect to TrueUSD from November 2020 until April 2023.

Jorge G. Tenreiro, Acting Chief of the SEC’s crypto unit, emphasised the importance of registration to avoid depriving investors.

“TrueCoin and TrustToken sought profits for themselves by exposing investors to substantial, undisclosed risks through misrepresentations about the safety of the investment.”

SEC Calls TrueUSD as ‘Purported Stablecoin’

The securities regulator called TrueUSD a “purported stablecoin” for falsely marketing the investment opportunity as safe and trustworthy.

According to the complaint, both backers claimed that TUSD was fully backed by U.S. dollars or their equivalent. However, a substantial portion of the asset backing TUSD was invested in a speculative and risky offshore investment fund.

The complaint read that in March 2022, an offshore entity and TrueCoin invested more than half a billion dollars of the assets backing TrueUSD in the speculative fund.

“TrueCoin and TrustToken became aware of redemption problems at the offshore fund but continued to make false statements to investors casting TUSD as backed one-for-one by U.S. dollars.”

Further, by September 2024, 99% of the reserves backing TUSD were invested in the speculative fund.

Both TrueCoin and TrustToken did not deny or admit the SEC’s allegations. They have agreed to settle the regulator’s charges with civil penalties of $163,766 each. Additionally, TrueCoin has agreed to pay a disgorgement of $340,930 with a prejudgment interest of $31,538.

The TrueUSD stablecoin has a market cap of $495 million and has recovered from a slight slump following the news. TUSD is currently trading at $0.99 at press time.