TL;DR
- Fraudulent Claims: TrustToken and TrueCoin falsely marketed TrueUSD (TUSD) as fully backed by U.S. dollars while investing in a risky offshore fund.
- SEC Settlement: Both companies agreed to pay $163,766 each in civil penalties, with TrueCoin also paying $340,930 in disgorgement and $31,538 in interest.
- Investor Protection: The SEC emphasized the importance of registration to protect investors from undisclosed risks and ensure access to crucial information.
The U.S. Securities and Exchange Commission (SEC) has announced a settlement with TrustToken Inc. and TrueCoin LLC over allegations of investor fraud and unregistered sales of investment contracts involving the TrueUSD (TUSD) stablecoin.
The SEC’s complaint, filed in the U.S. District Court for the Northern District of California, accused the companies of falsely marketing TUSD as fully backed by U.S. dollars while investing a substantial portion of the assets in a speculative offshore investment fund.
Misleading Investors
From November 2020 to April 2023, TrueCoin and TrustToken allegedly engaged in the unregistered offer and sale of investment contracts in the form of TUSD and profit-making opportunities related to TrueUSD on the TrueFi lending protocol.
The SEC’s complaint highlighted that by March 2022, after the TUSD operations were sold to an offshore entity, more than half a billion dollars of the assets backing TUSD were invested in the speculative fund.
Despite being aware of redemption problems by Fall 2022, the companies continued to mislead investors by claiming TUSD was backed one-for-one by U.S. dollars.
TrustToken and TrueCoin Settlement Details
TrueCoin and TrustToken have reached a settlement regarding the SEC’s charges, neither admitting nor denying the allegations. Both companies will incur civil penalties of $163,766 each.
Additionally, TrueCoin will pay a disgorgement of $340,930 along with prejudgment interest amounting to $31,538. The settlements are subject to court approval and include final judgments enjoining the companies from violating applicable federal securities laws.
SEC’s Stance on Registration
Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets & Cyber Unit, emphasized the importance of registration in protecting investors.
“TrueCoin and TrustToken sought profits for themselves by exposing investors to substantial, undisclosed risks through misrepresentations about the safety of the investment,” Tenreiro stated.
He added that this case exemplifies why registration matters, as it ensures investors have access to key information needed to make fully informed decisions. The settlement marks a significant development in the SEC’s ongoing efforts to regulate the cryptocurrency market and protect investors from fraudulent activities.
