The United States Securities and Exchange Commission (SEC) settled charges against TrueCoin and TrustToken for fraudulent and unregistered sales of investment contracts involving the TrueUSD stablecoin.
99% of funds were overseas?
According to the SEC, TrueCoin and TrustToken offered and sold unregistered investment contracts in the form of TrueUSD from November 2020 until April 2023 with profit-making opportunities with respect to TrueUSD on TrueFi. Furthermore, the SEC alleged the companies engaged in false marketing by claiming that TUSD was fully backed by US dollars or their equivalent, when the funds backing the stablecoin had been invested in a risky overseas investment fund. By the fall of 2022, the companies were aware they could have difficulties with TUSD redemption. Nonetheless, 99% of the funds backing TUSD were invested in the overseas fund by September 2024. The SEC claimed by approximately March 2022, TUSD operations had been sold to an offshore entity. TrueCoin and TrustToken did not admit or deny the allegations but consented to final judgments enjoining them from further violations of applicable federal securities laws and requiring them to pay civil penalties of $163,766 each. TrueCoin will also pay a disgorgement of $340,930 with prejudgment interest of $31,538. The settlements are subject to court approval.
TUSD’s issues were noticeable
Trouble had been brewing with TUSD for a while. TUSD depegged in June 2023 after it paused minting via crypto custody service Prime Trust. Prime Trust had just been issued a cease-and-desist order by Nevada regulators on suspicion that it was insolvent. The stablecoin again depegged in January after massive selling sparked by difficulties posting real-time attestations of its reserves, hinting at under-collateralization. The issuers blamed the problem with attestation on mining activity associated with Binance Launchpool and hired a second auditing firm. Binance delisted several TUSD trading pairs in March but did not fully delist the coin.
TrueCoin and TrustToken agreed to a settlement with the SEC, including fines and banning further violations of the law. The situation underlines the importance of strict compliance with regulatory requirements and transparency in cryptocurrency operations.
Comments