Federal Securities Regulators Reach Settlement with TrueUSD Issuer
Federal securities regulators, specifically the U.S. Securities and Exchange Commission (SEC), have finalized a settlement with the issuer of TrueUSD (TUSD), TrueCoin, and the lending protocol operator, TrustToken. These entities were accused of the fraudulent sale of unregistered investment contracts.
According to the SEC, TrueCoin and TrustToken were involved in offering and selling TUSD as an unregistered security from November 2020 to April 2023. The core allegation was that these parties misrepresented TrueUSD as a stablecoin fully backed by the U.S. dollar.
Uncovering the Reality Behind TUSD's Backing
The SEC's investigation revealed that while TrueCoin and TrustToken claimed that TrueUSD was entirely backed by the U.S. dollar, a significant portion of the assets meant to back TUSD were instead invested in a speculative and high-risk offshore investment fund. This was done in an effort to generate additional returns.
Throughout 2022, as per the SEC's findings, TrueCoin and TrustToken became aware of redemption issues with the offshore fund. Despite this knowledge, they continued to assert that TUSD was fully backed on a one-for-one basis by the U.S. dollar. By March 2022, an excess of half a billion dollars of TUSD's backing assets was invested in the speculative fund. Fast forward to September 2024, and the SEC reports that a staggering 99% of the reserves backing the stablecoin had been allocated to the offshore fund.
Settlement Without Admission of Guilt
In response to the charges, TrueCoin and TrustToken have agreed to a settlement with the SEC. Importantly, this settlement involves them neither admitting nor denying the allegations, and it is still pending court approval. Under the terms of the settlement, TrueCoin and TrustToken are obliged to refrain from infringing upon any applicable federal securities laws in the future.
Additionally, they have agreed to pay civil penalties of $163,766 each. TrueCoin is further required to pay a disgorgement amounting to $340,930, along with prejudgment interest of $31,538.
This settlement marks a significant step by the SEC in its ongoing efforts to regulate the cryptocurrency markets and ensure compliance with securities laws. For entities operating within the blockchain technology and decentralized finance (DeFi) space, this serves as a crucial reminder of the stringent regulatory landscape they navigate.
