The U.S. Securities and Exchange Commission (SEC) announced settled charges against crypto firms Trusttoken Inc. and Truecoin LLC on Tuesday, September 24, 2024, accusing them of fraudulent misrepresentations and unregistered sales of investment contracts tied to the stablecoin TrueUSD (TUSD).
Nature of the Allegations
According to the SEC's complaint, between November 2020 and April 2023, the companies falsely marketed TUSD as a stablecoin fully backed by U.S. dollars while actually investing a large portion of the reserves in a speculative offshore fund. By fall 2022, they were aware of redemption issues with that fund yet continued to make false statements about TUSD's backing. By September 2024, the SEC claims 99% of the reserves were held in the risky fund, exposing investors to severe undisclosed risks. Additionally, the firms sold unregistered investment contracts through TUSD and the Truefi lending platform, violating federal securities laws.
Settlement and Penalties
Without admitting or denying the findings, Trusttoken and Truecoin agreed to settle by paying civil penalties and disgorgement, pending court approval. Acting Chief Jorge G. Tenreiro of the SEC’s Crypto Assets and Cyber Unit emphasized, “Registration requirements provide investors with critical information. These cases demonstrate our commitment to market integrity.” The SEC noted that its investigation into the matter remains ongoing.
Market Impact and TUSD Decline
The SEC action amplified TUSD’s troubles. In January 2024, the stablecoin lost its peg, dropping to $0.979. Supply then collapsed from 1.1 billion to 612 million tokens by late March. As of September 24, 2024, TUSD's market capitalization stood at $495 million, representing merely 0.0215% of the $2.3 trillion total crypto market. Its 24-hour global trade volume reached $19.39 million, or about 0.02074% of the day's $93.52 billion in overall crypto trading. The case underscores the critical need for transparency and compliance in the stablecoin sector, and market participants await further developments from the SEC investigation.