SEC Settles Fraud Charges Against TrueUSD Stablecoin Issuers

The U.S. SEC has settled fraud charges against TrueCoin and TrustToken, the parent firms behind TrueUSD stablecoin, over fraudulent and unregistered sales of investment contracts.

The U.S. Securities and Exchange Commission (SEC) has settled fraud charges against TrueCoin and TrustToken, the parent firms behind TrueUSD (TUSD) stablecoin, over fraudulent and unregistered sales of investment contracts, according to an SEC statement on Monday.

The in-principle settlement, dated September 24, follows an investigation which showed that there were misleading statements regarding the complete backing of TrueUSD stablecoin with U.S. dollars.

The companies misrepresented TrueUSD’s stability, according to a complaint from the SEC filed with the District Court for Northern California, against the ostensible full collateralization by the U.S. dollar when its lion’s share was actually invested in a high-risk offshore fund.

The SEC alleges that TrueCoin and TrustToken made “false and misleading statements regarding the complete backing of TrueUSD with U.S. dollars.”

The SEC also alleges that TrueCoin and TrustToken failed to register the sales of these investment contracts with the SEC.

The SEC's complaint further alleges that TrueCoin and TrustToken sold these unregistered investment contracts between November 2020 and April of this year.

The sales were made through a lending protocol known as TrueFi that promised profit opportunities.

TrueCoin and TrustToken did not admit or deny the charges brought by the SEC but agreed to pay civil penalties of $163,766 each, plus a disgorgement of $340,930 with prejudgment interest. The settlements are pending court approval.

The SEC's investigation found that TrueCoin and TrustToken began TrueUSD operations in 2018 from the United States. However, by fall 2022, the firm encountered potential redemption issues.

Despite this, the SEC said 99% of TrueUSD’s backing was still invested abroad as of September 2024.

TrueUSD stablecoin operations were sold to an offshore entity called Techteryx, which took control of its ownership structure by March 2022 amid poor banking conditions for crypto businesses in the United States following successive collapses of several financial institutions.

As a result, TrueUSD is now largely pegged to an offshore dollar fund and its market value has dropped to less than half a billion, compared to its more-than-$4-billion-high during the crypto bull market.