- The SEC has filed charges against TrueCoin and TrustToken alleging fraud and the offering of unregistered investment contracts.
- TrueCoin issued the TrueUSD (TUSD) stablecoin, while TrustToken operated the TrueFi lending protocol.
- The regulator alleges that, as of September 2024, 99% of TUSD reserves were invested in an offshore speculative fund.
The U.S. Securities and Exchange Commission (SEC) has charged crypto firms TrueCoin and TrustToken, accusing them of defrauding investors through a stablecoin-linked investment program.
In a press release dated Tuesday, September 24, 2024, the SEC said it charged both companies with fraud and the offering of unregistered investment contracts related to the TrueUSD (TUSD) stablecoin. TUSD had been integrated by multiple exchanges and used in various crypto markets.
99% of TUSD reserves invested in speculative fund
According to the SEC, TrueCoin, the issuer of TUSD, and TrustToken, the operator of the TrueFi lending protocol, offered unregistered investment contracts tied to TUSD between November 2020 and April 2023.
The regulator alleges that the companies promoted sales of TUSD as “profit-generating opportunities.” These offers were marketed as safe instruments, with the TUSD issuer claiming 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 supporting the token were instead placed into a speculative offshore investment fund. TrueCoin and TrustToken then used those investments to generate profits for themselves, the SEC says.
“TrueCoin and TrustToken sought their own gains while exposing investors to significant, undisclosed risks through false statements about the safety of the investment,” said Jorge G. Tenreiro, Deputy Chief of the SEC’s Crypto Assets and Cyber Unit.
The SEC further alleges that by September 2024, 99% of the purported TUSD reserves were held in the speculative fund. Reports indicate that both TrueCoin and TrustToken reached settlements with the SEC.
Those settlements reportedly include civil penalties of $163,766 for each company. In addition, the TUSD issuer TrueCoin is to pay $340,930 in disgorgement and $31,538 in prejudgment interest.