Charges against TrueCoin and TrustToken were brought about by the SEC’s disclosure that nearly all of TrueUSD’s reserves were invested in a hazardous offshore fund.
The U.S. Securities and Exchange Commission (SEC) disclosed that TrueCoin LLC and TrustToken Inc., the developers of the TrueUSD (TUSD) stablecoin, had allocated nearly all of their reserves to a high-risk offshore fund. This discovery resulted in allegations of fraudulent and unregistered investment contract sales, which the companies have resolved without conceding or denying the allegations.
The SEC has stated that TrueCoin and TrustToken made a false claim that TUSD was wholly secured by U.S. dollars, which misled investors about the safety of their funds. The companies advertised TUSD as a secure, dollar-backed investment while selling it through their TrueFi lending platform from November 2020 to April 2023. These reserves were, in fact, invested in speculation assets that presented substantial risks to investors.
This high-risk fund had received over $500 million in funds intended to support TUSD by March 2022. TrueCoin and TrustToken persisted in misleading investors, despite the redemption issues that emerged in the autumn of 2022. In September 2024, this speculative fund was bound to a staggering 99% of TUSD’s reserves. According to Jorge G. Tenreiro, the Acting Chief of the Crypto Assets & Cyber Unit at the Securities and Exchange Commission, the companies pursued profits while simultaneously harming the capital of investors by making fraudulent claims regarding the stability of the investment.
In response to the SEC’s findings, both companies reached an agreement to resolve the matter. Additionally, they will be subject to penalties and prohibited from engaging in any future violations of securities laws. TrueCoin will pay $340,930 in disgorgement and an additional $31,538 in interest, subject to court approval. The two organizations have also consented to pay civil penalties of $163,766 each.
This case is part of the SEC’s broader assault on the crypto industry, which resulted in a record $4.68 billion in fines collected in 2024. At a congressional hearing, legislators enquired about the SEC’s regulatory strategy for digital assets from Chairman Gary Gensler. Patrick McHenry, the Chairman of the Committee, accused the SEC of overreach and criticized Gensler’s leadership for transforming the agency into a “rogue” regulator.
