Federal securities regulators have reached an agreement with TrueUSD (TUSD) issuer TrueCoin and credit protocol operator TrustToken to settle charges for the alleged and fraudulent sale of unregistered investment contracts.
The US Securities and Exchange Commission (SEC) accuses TrueCoin and TrustToken of offering and selling TUSD as an unregistered security from November 2020 to April 2023.
The regulator says that while TrueCoin and TrustToken claimed that TrueUSD was fully backed by the US dollar, a substantial portion of the assets allegedly backing TUSD were invested in a speculative and risky offshore investment fund to generate more income.
The SEC alleges that TrueCoin and TrustToken were aware of redemption issues at the offshore fund in 2022, but continued to claim that TUSD is backed one-for-one by the US dollar.
By March 2022, more than half a billion dollars of the assets that would support TUSD had been invested in the speculative fund. The SEC says that by September 2024, 99% of the reserves supporting the stablecoin have already been invested in the offshore fund.
In one statementthe SEC says TrueCoin and TrustToken agreed to settle the charges without admitting or denying the allegations, although the settlements are still subject to court approval.
“TrueCoin and TrustToken have agreed to settle the SEC’s charges by agreeing to enter final judgments enjoining them from violating applicable provisions of the federal securities laws and to pay civil penalties of $163,766 each. TrueCoin has agreed to pay a payout of $340,930 with accrued interest of $31,538.”
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