Federal securities regulators have reached an agreement with TrueUSD (TUSD) issuer TrueCoin and lending protocol operator TrustToken to settle charges for the alleged and fraudulent sale of unregistered investment contracts.
The US Securities and Exchange Commission (SEC) accuses TrueCoin and TrustToken of offering and selling TUSD as an unregistered security from November 2020 to April 2023.
The regulator says that while TrueCoin and TrustToken claimed that TrueUSD was fully backed by the U.S. dollar, a substantial portion of the assets purportedly backing TUSD were invested in a speculative and risky offshore investment fund to generate more earnings.
The SEC alleges that TrueCoin and TrustToken learned of redemption problems at the offshore fund in 2022 but continued making claims that TUSD is backed one-for-one by the U.S. dollar.
By March 2022, more than half a billion dollars of the assets supposedly backing TUSD were invested in the speculative fund. The SEC says that by September 2024, 99% of the reserves backing the stablecoin are already invested in the offshore fund.
In a statement, the SEC says TrueCoin and TrustToken agreed to settle the charges without admitting or denying the allegations albeit the settlements are still subject to court approval.
“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 and to pay civil penalties of $163,766 each. TrueCoin has agreed to pay disgorgement of $340,930 with prejudgment interest of $31,538.”
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