The issuers of the TrueUSD (TUSD), TrueCoin and Trust Token, have paid charges to the U.S. Securities and Exchange Commission (SEC) for fraudulent and unregistered sales of investment contracts. Claiming false assertions on the stability of TrueUSD, the SEC charged the businesses of promoting it as entirely backed by US dollars, so misleading. Actually, a good amount of the stablecoin’s reserves were made of dangerous offshore money.
The SEC’s lawsuit claims that TrueCoin and Trust Token provided unregistered investment contracts linked to TrueUSD from November 2020 to April 2023, therefore encouraging profit prospects on their lending platform TrueFi. The SEC found that most TrueUSD’s backing had been placed in a speculative offshore fund, despite the businesses’ claims that US dollars or similar assets completely supported TrueUSD. Investors had concealed this high-risk investment, which accounted for 99% of the money backing TrueUSD by September 2024.
Quit immediately after TUSD was sold to @justinsuntron and I've never felt more vindicated… https://t.co/NZGzQ3guvl
— jacksun.eth – pirate arc (@hhjacks) September 24, 2024
TrueCoin and Trust Token continued to fraudulently state that TrueUSD has complete backing despite knowing early on in autumn 2022 redemption challenges. The SEC underlined that these activities compromised the security of the stablecoin by exposing investors to major, hidden risks.
Though they agreed to pay the fines, TrueCoin and Trust Token did not admit or refute the SEC’s claims. Each of the two businesses will pay civil fines of $163,766. Besides, TrueCoin will pay $31,538 in prejudgment interest in addition to $340,930 in disgorgement. Court permission over these payments is required.
TrueUSD’s problems had become clear for some time. Faced with bankruptcy concerns, Prime Trust stopped minting coins in June 2023, therefore losing the peg to the US dollar. This incident raised questions about the stablecoin’s actual support. TrueUSD once more suffered depegging in January from delays in providing real-time reserve attestations, hence highlighting undercollateralization. These problems caused Binance delisting of multiple TUSD trading pairs in March 2024, thereby aggravating the problems of the stablecoin.
The SEC’s settlement with TrueCoin and TrustCoin emphasizes the growing regulatory pressure on stablecoin issuers to guarantee openness and appropriate backing of their digital assets. The TrueUSD case is a sobering reminder of the perils of poor management and the importance of open disclosures in the expanding stablecoin sector.
