- The SEC has filed charges against TrueCoin and TrustToken for fraud and unregistered offering of investment contracts.
- TrueCoin issued the TrueUSD (TUSD) stablecoin, while TrustToken operated the TrueFi lending protocol.
- Regulators allege that 99% of TUSD’s reserves were invested in offshore funds as of September 2024.
The U.S. Securities and Exchange Commission (SEC) has filed charges against crypto firms TrueCoin and TrustToken, accusing them of deceiving investors in investment programs tied to a stablecoin.
In a press release on Tuesday, September 24, 2024, the SEC said it charged both companies with fraud and the unregistered offer of investment contracts related to the TrueUSD (TUSD) stablecoin.
Many exchanges have integrated TUSD into their platforms.
99% of TUSD reserves invested in speculative funds
According to the SEC, TrueCoin, the issuer of TUSD, and TrustToken, the operator of the TrueFi lending protocol, engaged in an unregistered offering of investment contracts tied to TUSD between November 2020 and April 2023.
The crypto firms promoted what regulators describe as sales of TUSD packaged as “yield-generating opportunities.” These offerings were marketed as safe, with the issuer representing that the stablecoin was 100% backed by U.S. dollars.
However, the complaint filed in the U.S. District Court for the Northern District of California alleges that most of the assets backing the token were placed into offshore speculative investment funds. TrueCoin and TrustToken allegedly used those investments to generate returns for themselves.
“TrueCoin and TrustToken sought to profit for themselves by exposing investors to significant undisclosed risks through misstatements about the safety of the investment,” said Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets and Cyber Unit.
The SEC alleges that by September 2024, the defendants had 99% of the claimed TUSD reserves invested in speculative funds.
Both TrueCoin and TrustToken have reportedly agreed to settlements with the SEC. The settlements include civil penalties of $163,766 each. TrueCoin, the TUSD issuer, will also pay $340,930 in disgorgement and $31,538 in prejudgment interest.