- The SEC has charged TrueCoin LLC and TrustToken Inc. for fraudulent and unregistered sales of TrueUSD (TUSD) investment contracts
- The companies allegedly misled investors by falsely claiming that TUSD was fully backed by U.S. dollars, while much of the backing was invested in a risky offshore fund
- TrueCoin and TrustToken have agreed to settle the charges, paying civil penalties and disgorgement without admitting or denying the allegations
The Securities and Exchange Commission (SEC) has settled fraud charges against TrueCoin LLC and TrustToken Inc. for misleading investors about the backing of their stablecoin, TrueUSD (TUSD). According to the SEC, the two companies marketed TUSD as a safe and fully-backed asset, when in reality, they had invested a large portion of the backing funds into a speculative offshore investment. TrueCoin and TrustToken have agreed to pay penalties and disgorgement as part of the settlement, though they have neither admitted nor denied the charges.
Users Subjected to “Substantial, Undisclosed Risks”
From November 2020 to April 2023, TrueCoin and TrustToken promoted TUSD as a stablecoin, claiming it was backed one-for-one by U.S. dollars. However, the SEC’s complaint alleges that by March 2022, more than half a billion dollars in assets backing TUSD had been invested in a risky offshore fund.
By September 2024, 99% of the reserves supposedly backing TUSD had been tied up in this fund, yet the companies continued to falsely assure investors of its stability.
In a press release announcing the settlement, Jorge Tenreiro, Acting Chief of the SEC’s Crypto Assets & Cyber Unit, emphasized the seriousness of the case:
TrueCoin and TrustToken sought profits for themselves by exposing investors to substantial, undisclosed risks through misrepresentations about the safety of the investment. This case is a prime example of why registration matters, as investors in these products continue to be deprived of the key information needed to make fully informed decisions.
As part of the settlement, both TrueCoin and TrustToken have agreed to pay civil penalties of $163,766 each, along with disgorgement payments. TrueCoin will also pay $340,930 in disgorgement and $31,538 in prejudgment interest. The companies are also prevented from further violations of federal securities laws, pending court approval.
TUSD is still listed on some exchanges, including Binance, although its daily volume barely reaches $10 million dollars.
