According to the SEC complaint filed in the United States District Court for the Northern District of California, TrueCoin is the issuer of TUSD, and TrustToken was the developer and operator of the TrueFi lending protocol. The agency alleges that from November 2020 to April 2023, TrueCoin and TrustToken offered and sold unregistered investment contracts in the form of TUSD and promised investors returns on TrueUSD on TrueFi.
The complaint states that TrueCoin and TrustToken falsely represented these investments as safe and trustworthy. The companies claimed that TUSD was fully backed by U.S. dollars or their equivalent, when in fact a significant portion of the assets allegedly backing TUSD were invested in an offshore investment fund. This was done so that the defendants could make additional profits, the SEC explained.
By March 2022, TrustToken and TrueCoin had invested more than half a billion dollars of TUSD collateral in a speculative fund. In the fall of 2022, TrueCoin and TrustToken learned of redemption issues in the offshore fund, but continued to make false statements to investors, presenting TUSD as a stablecoin backed 1:1 by the U.S. dollar. As of September 2024, 99% of the reserves backing TUSD were invested in the speculative fund, the department specified.
TrueCoin and TrustToken did not admit or deny the regulator’s allegations, agreeing to pay civil penalties of $163,766 each. TrueCoin agreed to return $340,930 in illicitly obtained funds, plus interest for a pre-trial settlement of $31,538. The companies also agreed not to violate federal securities laws in the future.
“TrueCoin and TrustToken sought to profit while exposing investors to significant risks that were not disclosed. Moreover, information about the safety of the investments was grossly misrepresented. This is a clear example of why SEC registration is important, as investors are deprived of key information they need to make informed decisions,” said Jorge G. Tenreiro, Acting Commissioner of the SEC’s Division of Cryptocurrency and Cybersecurity.
In September, crypto trading platform Robinhood also reached a settlement with US authorities — the company will pay a fine of $3.9 million for violating consumer rights. New York-based Uniswap Labs will also pay $175,000 for illegally offering cryptocurrency derivatives.
Source: Bits
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