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The SEC accuses TrustToken and TrueCoin of defrauding investors through their stablecoin investment program.
The SEC alleged that 99% of TUSD stablecoin reserves were invested in a speculative offshore fund.
Both companies agreed to pay penalties as part of the settlement, but neither admitted nor denied the allegations.
TrueCoin issued TUSD while TrustToken developed the TrueFi lending protocol, according to the SEC. The settlement requires both companies to pay $163,766 in penalties and TrueCoin to pay $340,930 in restitution for alleged wrongdoing.
The SEC alleges that between November 2020 and April 2023, TrueCoin and TrustToken engaged in unregistered sales of investment contracts linked to TUSD. Marketed as secure and fully backed by U.S. dollars, these contracts were instead tied in part to a “speculative and risky offshore investment fund,” exposing investors to significant, undisclosed risks.
“TrueCoin and TrustToken sought to profit for themselves by exposing investors to significant, undisclosed risks through misrepresentations regarding the security of their investments,” said Jorge G. Tenreiro, chief of the SEC’s Crypto Assets and Cyber Unit, adding that this case highlights the importance of proper registration to ensure investors receive accurate information.
The SEC also noted that by the end of 2022, both companies were aware of issues with the TUSD redemption process but continued to mislead investors. As of September 2024, 99% of TUSD reserves were reportedly invested in the speculative fund.
*This is not investment advice.