TrustToken and TrueCoin Settle SEC Allegations Over TrueUSD
Settlement Overview
TrustToken and TrueCoin, the firms responsible for the TrueUSD (TUSD) stablecoin, have reached a settlement with the U.S. Securities and Exchange Commission (SEC) concerning allegations of misleading and unregistered sales of investment contracts. The agreement stipulates that the companies will pay a total of $700,000 in penalties without admitting or denying the findings of the SEC.
Statement from TrustToken and TrueCoin
In a release to CryptoSlate, the two companies expressed their commitment to resolving the issue:
“We have opted for a no-admit/no-deny settlement with the SEC to resolve the investigation regarding TrueUSD and TrueFi. Although we were ready to contest the allegations, we believe that settling allows us to redirect our focus towards promising opportunities in our business.”
Details of the SEC’s Complaint
Filed in the U.S. District Court for the Northern District of California, the SEC’s complaint alleged that between November 2020 and April 2023, TrustToken and TrueCoin conducted unregistered offers and sales of TUSD as investment contracts, utilizing their lending protocol TrueFi. The SEC accused the companies of inaccurately representing TUSD as being fully backed by U.S. dollars or equivalent assets, while a significant portion was invested in a speculative offshore fund.
Financial Consequences and Regulatory Insights
The SEC’s investigation revealed that, by March 2022, over $500 million of TUSD backing assets were allocated to the speculative fund. By September 2024, it was reported that 99% of the reserves supporting TUSD had been invested in this fund, thus exposing investors to considerable undisclosed risks.
Importance of Compliance
Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets & Cyber Unit, stressed the necessity of registration for investor protection:
“This case exemplifies the critical role of registration in safeguarding investors, who are often deprived of essential information necessary for informed decision-making.”
Settlement Figures
- TrueCoin and TrustToken will each pay civil penalties of $163,766.
- TrueCoin is responsible for an additional $340,930 in disgorgement and $31,538 in prejudgment interest.
- Both companies have consented to injunctions to prevent future violations of federal securities laws.
Market Impact and Regulatory Trends
This agreement comes amid heightened regulatory scrutiny within the crypto sector. In 2024, the SEC reportedly collected a remarkable $4.68 billion in penalties from the cryptocurrency industry, an increase from $3.9 billion in 2023.
Following the announcement of the settlement, TrueUSD experienced a minor de-peg, with its market capitalization nearly hitting $494 million. Although it briefly recovered above $0.999 on September 27, it has since fallen to approximately $0.98, remaining within the fluctuation range observed over the past six months.
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