The U.S. Securities and Exchange Commission (SEC) has reached a settlement with TrueCoin and TrustToken, the companies involved in the TrueUSD stablecoin, for a 700,000 USD fine.
The official announcement pointed out that relevant supporters of the TrueUSD (TUSD) stablecoin were suspected of misleading investors and falsely stating the stability of the token.
According to the complaint filed in the U.S. District Court for the Northern District of California, TrueCoin and TrustToken engaged in an unregistered offer and sale of investment contracts in the form of the crypto asset TUSD. They were also involved in a “profit opportunity” related to TrueUSD from November 2020 to April 2023.
Jorge G. Tenreiro, acting head of the SEC’s crypto unit, stressed the importance of registration to avoid depriving investors.
“TrueCoin and TrustToken sought to profit from their own misrepresentations about the security of their investments, exposing investors to significant, undisclosed risks.”
SEC Calls TrueUSD a “So-Called Stablecoin”
The securities regulator called TrueUSD a “so-called stablecoin” for falsely marketing the investment opportunity as safe and secure.
According to the complaint, backers claim that TUSD is fully backed by the U.S. dollar or its equivalent. However, a large portion of the assets backing TUSD are invested in a speculative and risky offshore investment fund.
The complaint states that in March 2022, an offshore entity and TrueCoin invested more than 500 million USD in assets backing TrueUSD in the speculative fund.
“TrueCoin and TrustToken were aware of the redemption issues with offshore funds, but continued to make false statements to investors, claiming that TUSD was backed one-to-one by the U.S. dollar.”
Furthermore, by September 2024, 99% of the reserves backing TUSD were invested in the speculative fund.
TrueCoin and TrustToken did not deny or admit the SEC’s allegations. They have agreed to settle the regulator’s allegations by paying a civil penalty of 163,766 USD per company. In addition, TrueCoin agreed to pay 340,930 USD in disgorgement and 31,538 USD in prejudgment interest.
The TrueUSD stablecoin, which has a market cap of 495 million USD, recovered slightly following the announcement. Currently, TUSD is trading at 0.99USD.
