Key Points
- SEC charges TrueCoin and TrustToken for fraud and unregistered securities involving TrueUSD.
- 99% of TrueUSD’s reserves were invested in a risky offshore fund by September 2024.
- Both companies settled the case, agreeing to pay over $600,000 in penalties and disgorgement.
- The case highlights the SEC’s increasing crackdown on crypto-related fraud and regulatory violations.
The U.S. Securities and Exchange Commission (SEC) has filed charges against TrueCoin LLC and TrustToken Inc., accusing them of fraud regarding their stablecoin, TrueUSD (TUSD).
The SEC charges come as part of an ongoing effort to hold crypto companies accountable for misleading investors and selling unregistered securities.
Just in: @SECGov charges @TrustToken and #TrueCoin for defrauding investors in a #stablecoin investment program and for an unregistered offer and sale of securities.
📎Full Release: https://t.co/ckANJsnhh8$TRU #TruUSD #TUSD $TUSD #DeFi pic.twitter.com/5ci4f42UBK
— Dan Spuller (@DanSpuller) September 24, 2024
SEC Charges Shake Crypto Industry
The SEC charges against TrueCoin and TrustToken revolve around allegations that they misled investors from November 2020 to April 2023.
While marketing TUSD as a fully backed stablecoin, the companies funneled nearly all of the reserves into a speculative offshore investment fund. By September 2024, 99% of TUSD’s reserves were reportedly tied up in this risky venture, exposing investors to significant and undisclosed risks.
Jorge G. Tenreiro, the Acting Chief of the SEC’s Crypto Assets & Cyber Unit, emphasized that the companies took advantage of investor trust.
They promised a secure, fully backed stablecoin while pursuing higher profits through risky investments. Tenreiro added, “The SEC charges these companies with defrauding their investors, prioritizing profits over transparency.”
Without admitting or denying the SEC charges, both companies agreed to settle. TrueCoin and TrustToken will each pay $163,766 in civil penalties. TrueCoin will also disgorge $340,930 in profits, with an additional $31,538 in prejudgment interest.
TrueCoin and TrustToken Face Major Repercussions
The SEC charges TrueCoin and TrustToken with fraud and the unregistered sale of investment contracts involving TrueUSD and the TrueFi lending protocol.
This decentralized lending platform allowed users to loan their TUSD stablecoins to companies in exchange for interest payments.
By the Fall of 2022, the companies were aware of redemption issues surrounding TrueUSD but continued to misrepresent the stablecoin as fully backed by U.S. dollars or equivalent assets.
These SEC charges highlight the companies’ ongoing deceit, as they profited from investors unaware of the significant risks tied to TUSD.
The settlements reached with the SEC will be finalized pending court approval. Despite the outcome, the SEC charges against these companies send a strong message across the crypto industry: misleading investors and conducting unregistered securities sales will not go unnoticed.
Growing Regulatory Pressure on Crypto
The SEC charges TrueCoin and TrustToken as part of a broader crackdown on crypto companies engaging in fraudulent activities. In recent months, the SEC has pursued high-profile cases against major players like Binance, Coinbase, and Kraken for similar violations.
This wave of SEC charges underscores the increasing scrutiny of the crypto market as regulators focus on protecting investors. By targeting companies that mislead users or offer unregistered securities, the SEC is looking to establish clearer guidelines in the ever-evolving crypto space.
TrueUSD, which currently has a market cap of $494 million, saw a slight de-peg from the U.S. dollar in response to news of the SEC charges.
As the legal battles continue, both crypto companies and investors are paying close attention to the SEC’s actions, which could have far-reaching implications for the future of stablecoins and decentralized finance.
In conclusion, the SEC charges against TrueCoin and TrustToken are a stark reminder of the importance of transparency and investor protection in the crypto space.
As regulatory bodies like the SEC continue to crack down on fraudulent activity, companies must ensure they adhere to the legal requirements or face similar consequences.
