SEC Settles Charges with TrueUSD Issuer and TrustToken

John Darbie
Photo: Finoracle.net

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.

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John Darbie is a seasoned cryptocurrency analyst and writer with over 10 years of experience in the blockchain and digital assets industry. A graduate of MIT with a degree in Computer Science and Engineering, John specializes in blockchain technology, cryptocurrency markets, and decentralized finance (DeFi). His insights have been featured in leading publications such as CoinDesk, CryptoSlate, and Bitcoin Magazine. John’s articles are renowned for their thorough research, clear explanations, and practical insights, making them a reliable source of information for readers interested in cryptocurrency. He actively follows industry trends and developments, regularly participating in blockchain conferences and webinars. With a strong reputation for expertise, authoritativeness, and trustworthiness, John Darbie continues to provide high-quality content that helps individuals and businesses navigate the evolving world of digital assets.