TrustToken and Truecoin are Under Heat as US SEC Charges Them With Fraud
SEC alleges that both entities engaged in the unregistered offer and sale of investment contracts in the form of TUSD and profit-making opportunities related to TUSD on TrueFi.
On September 24, 2024, the Securities and Exchange Commission (SEC) today announced settled charges against TrueCoin LLC and TrustToken Inc. for their fraudulent and unregistered sales of investment contracts involving TrueUSD (TUSD), a purported stablecoin.
According to the SEC’s complaint, filed in the U.S. District Court for the Northern District of California, TrueCoin was the issuer of TUSD, while TrustToken served as the developer and operator of TrueFi, a purported lending protocol.
The agency alleges that between November 2020 and April 2023, both entities engaged in the unregistered offer and sale of investment contracts in the form of TUSD and profit-making opportunities related to TUSD on TrueFi.
The complaint alleges that by March 2022, following the sale of TUSD operations to an offshore entity, this entity and TrueCoin had invested over half a billion dollars of the assets purportedly backing TUSD in the speculative fund.
Despite becoming aware of redemption issues at the offshore fund by Fall 2022, TrueCoin and TrustToken continued to make false statements to investors, portraying TUSD as backed one-to-one by U.S. dollars.
US SEC Accused TrueCoin and TrustToken of Misrepresentation
By September 2024, a staggering 99% of the reserves backing TUSD were invested in the speculative fund.
“TrueCoin and TrustToken pursued profits for themselves by exposing investors to substantial, undisclosed risks through misrepresentations about the safety of the investment,” stated Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets & Cyber Unit.
“This case is a clear example of why registration is so important. Investors in these products are still not getting the essential information they need to make well-informed decisions,” he explained.
Without admitting or denying the allegations, TrueCoin and TrustToken have agreed to settle the SEC’s charges by consenting to the entry of final judgments enjoining them from violating applicable provisions of the federal securities laws.
They will also pay civil penalties of $163,766 each. Furthermore, TrueCoin has agreed to pay a disgorgement of $340,930 along with prejudgment interest of $31,538. The settlements are subject to court approval.
