The SEC has accused companies TrustToken and TrueCoin of misleading investors through their stablecoin investment program.
SEC Allegations
The SEC alleges that 99% of the TUSD stablecoin reserves were invested in a speculative offshore fund. The regulator also noted that from November 2020 to April 2023, TrustToken and TrueCoin engaged in unregistered sales of investment contracts linked to TUSD. Marketed as secure and fully backed by U.S. dollars, these contracts were instead tied in part to a 'speculative and risky offshore investment fund,' exposing investors to significant, undisclosed risks.
Companies' Reaction
Both companies agreed to pay penalties as part of the settlement but neither admitted nor denied the allegations. TrustToken must pay $163,766 in penalties, while TrueCoin is to pay $340,930 in restitution for the alleged wrongdoing. TrueCoin issued TUSD, whereas TrustToken developed the TrueFi lending protocol.
SEC Statements
'TrueCoin and TrustToken sought to profit for themselves by exposing investors to significant, undisclosed risks through misrepresentations regarding the security of their investments,' said Jorge G. Tenreiro, chief of the SEC’s Crypto Assets and Cyber Unit. By the end of 2022, both companies were aware of issues with the TUSD redemption process but continued to mislead investors. As of September 2024, 99% of TUSD reserves were reportedly invested in the speculative fund.
This case highlights the importance of proper registration to ensure investors receive accurate information.
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