The United States Securities and Exchange Commission (SEC) reached an agreement with TrueCoin and TrustToken concerning allegations of fraudulent and unregistered sales of investment contracts related to the TrueUSD stablecoin.
On September 24, the SEC filed a complaint against the companies in the Northern District Court of California and subsequently settled the charges after the defendants opted not to have the matter resolved by a judge.
### Majority of Funds Abroad?
The SEC’s allegations highlighted that TrueCoin and TrustToken sold unregistered investment contracts in the form of TrueUSD (TUSD) from November 2020 until April 2023, advertising “profit-making opportunities” tied to TrueUSD on the TrueFi lending platform. The SEC further accused the companies of misleading marketing, asserting that TUSD was entirely backed by US dollars or equivalent assets when, in reality, the funds supporting the stablecoin had been allocated to a high-risk overseas investment fund.
By the fall of 2022, the companies recognized potential challenges with TUSD redemptions. Nevertheless, by September 2024, it was reported that 99% of TUSD’s backing was still tied up in the overseas fund.
The SEC noted that by around March 2022, the operations of TUSD had been transferred to an offshore entity, with the coin often being labeled as “Justin Sun-linked.”
While TrueCoin and TrustToken neither admitted nor denied the allegations, they agreed to final judgments that prevent them from further breaching federal securities laws and mandated them to pay civil penalties of $163,766 each. TrueCoin will also be required to pay a disgorgement of $340,930, along with prejudgment interest amounting to $31,538. These settlements await court approval.
*The SEC complaint against TrueCoin and TrustToken Source: Pacer*
### TUSD’s Troubles Emerge
Issues with TUSD had been surfacing for some time. The stablecoin lost its peg in June 2023 after halting minting via the crypto custody service Prime Trust, which had recently been issued a cease-and-desist order by Nevada regulators due to suspicions of insolvency.
*Source: Jacksun.eth*
TUSD experienced another depegging in January, triggered by large-scale selling linked to challenges in providing real-time attestations of its reserves, raising concerns about under-collateralization. The issuers attributed this attestation issue to mining activities “associated with Binance Launchpool” and subsequently engaged a second auditing firm.
In March, Binance removed several TUSD trading pairs from its platform but stopped short of fully delisting the coin.
Cointelegraph was unable to obtain a comment from TrueCoin regarding these developments.
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