The U.S. Securities and Exchange Commission (SEC) has charged TrustToken and TrueCoin with defrauding investors over their stablecoin, TUSD, which they falsely claimed was fully backed by U.S. dollars. The companies secretly invested over half a billion dollars in risky offshore funds, exposing investors to hidden risks. This case highlights the urgent need for regulatory scrutiny in crypto-asset markets.
Key Points:
- The SEC charges TrueCoin LLC and TrustToken Inc. with defrauding investors and unregistered sales of securities.
- Companies falsely claimed TrueUSD (TUSD) was fully backed by U.S. dollars.
- $500 million of TUSD reserves were secretly invested in a risky offshore fund.
- Settlement: TrueCoin and TrustToken settled with the SEC and agreed to pay civil penalties of $163,766 each. TrueCoin has agreed to pay a disgorgement of $340,930 with prejudgment interest of $31,538. The settlements are subject to court approval.
Short Narrative:
The SEC has settled charges against stablecoin issuers TrueCoin LLC and TrustToken Inc. for misleading investors about the safety of their stablecoin, TrueUSD (TUSD). Between November 2020 and April 2023, these companies falsely marketed TUSD as fully backed by U.S. dollars. In reality, by March 2022, over $500 million of TUSD reserves had been invested in a speculative offshore fund. Despite redemption issues emerging by Fall 2022, TrueCoin and TrustTokencontinued to mislead investors, falsely promoting TUSD as a safe investment backed one-for-one by dollars.
Compliance Insight:
The case underscores the importance of regulatory compliance in the crypto sector. Misrepresenting the backing of stablecoins and failing to register investment contracts with regulators puts investors at significant risk. This highlights the need for transparency and diligence in crypto asset offerings.
TrustToken and TrueCoin’s failure to disclose their risky investment of TUSD reserves exemplifies why regulatory oversight is critical in the crypto industry. Proper registration and truthful marketing of investment opportunities are essential to maintain investor confidence and avoid fraud charges.