SEC Settles with TrueCoin and TrustToken Over Misleading TUSD Stablecoin Investors

• The SEC claims 99% of TUSD reserves were invested in a high-risk fund by September 2024, despite being marketed as dollar-backed.
• TrueCoin and TrustToken settled SEC charges, agreeing to pay penalties without admitting or denying the fraudulent allegations.
• The SEC’s ongoing investigation into TUSD’s backing underscores the importance of transparency in the cryptocurrency sector.

The U.S. Securities and Exchange Commission (SEC) has reached a settlement with TrueCoin LLC and TrustToken Inc., following allegations of fraudulent sales tied to TrueUSD (TUSD), a stablecoin reportedly backed by U.S. dollars. 

According to the SEC, both companies misled investors by falsely claiming TUSD was fully backed by reserves, when in fact, a substantial portion had been invested in a risky offshore fund. This revelation has drawn close attention as TUSD was marketed as a stable, dollar-backed digital asset.

TUSD’s Backing in Question

According to the SEC’s complaint, filed in the U.S. District Court for the Northern District of California, the alleged misconduct spanned from November 2020 to April 2023. During this time, TrueCoin and TrustToken offered unregistered investment contracts involving TUSD and profit-making opportunities through the TrueFi lending platform. 

By 2022, a large portion of the reserves backing TUSD were no longer held in secure assets but were instead invested in speculative offshore funds. By September 2024, an alarming 99% of the TUSD reserves had been redirected to this high-risk investment, according to the SEC’s findings.

SEC Alleges Investor Misrepresentation

The SEC’s allegations also claim that despite growing issues with redeeming funds, TrueCoin and TrustToken continued to promote TUSD as fully backed by U.S. dollars. Notably, the SEC emphasized that these companies marketed the investment opportunity as secure while concealing the risks tied to the offshore investments. The case highlights a violation of securities laws, particularly given that TUSD was offered as a stablecoin meant to protect investors from volatility.

Financial Penalties and Settlement

Without admitting or denying the allegations, TrueCoin and TrustToken agreed to settle the charges. Both companies will each pay civil penalties amounting to $163,766. TrueCoin, in addition, will pay $340,930 in disgorgement, along with $31,538 in prejudgment interest.