TrustToken and TrueCoin, the companies behind the TrueUSD (TUSD) stablecoin, recently settled with the US Securities and Exchange Commission (SEC) regarding allegations of fraudulent and unregistered sales of investment contracts. The settlement requires the entities to pay a total of $700,000 in penalties and disgorgement, although they did not admit or deny the SEC’s findings.
In an exclusive statement to CryptoSlate, the TrustToken and TrueCoin teams explained their decision to settle, stating, “While we were prepared to defend our position, we ultimately decided that avoiding the burden and distraction of litigation is in our best interest, allowing us to focus on the exciting business opportunities ahead.”
The SEC’s complaint, filed in the US District Court for the Northern District of California, accused TrueCoin and TrustToken of engaging in unregistered offers and sales of TUSD as investment contracts through their TrueFi lending protocol between November 2020 and April 2023. The SEC alleged that the companies misrepresented TUSD as being fully backed by US dollars or equivalents when a significant portion of the assets were actually invested in a speculative offshore fund.
By March 2022, over half a billion dollars of TUSD-backing assets were reportedly invested in the speculative fund, with 99% of the reserves backing TUSD invested in the fund by September 2024. This exposed investors to undisclosed risks, according to the SEC.
Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets & Cyber Unit, emphasized the importance of registration in protecting investors, stating, “This case is a prime example of why registration matters, as investors in these products continue to be deprived of the key information needed to make fully informed decisions.”
As part of the settlement, TrueCoin and TrustToken agreed to pay civil penalties and disgorgement, with both companies consenting to injunctions preventing future violations of federal securities laws.
The settlement comes at a time of increased regulatory scrutiny in the crypto sector, with the SEC reportedly collecting a record $4.68 billion in fines from the industry in 2024, up from $3.9 billion in 2023.
Following the news of the settlement, TrueUSD experienced a slight de-peg, with its market cap initially standing at nearly $494 million. However, the peg has since fluctuated, currently hovering around $0.98. Despite this, the current level remains within ranges seen over the past six months.