The U.S. Securities and Exchange Commission (SEC) has taken action against crypto companies TrustToken Inc. and TrueCoin LLC, accusing them of defrauding investors and conducting unregistered sales of investment contracts related to the TrueUSD (TUSD) stablecoin.
According to the SEC’s complaint filed in the U.S. District Court for the Northern District of California, the companies engaged in fraudulent activities from November 2020 to April 2023. The regulator alleges that TrueCoin, the issuer of TUSD, and TrustToken, the developer of the TrueFi lending protocol, misled investors about the backing of TUSD and the safety of their investment opportunities.
The SEC claims that despite marketing TUSD as fully backed by U.S. dollars or equivalent assets, a significant portion of the backing assets were actually invested in a “speculative and risky offshore investment fund.” By September 2024, the complaint alleges that a staggering 99% of TUSD’s reserves were tied to this fund.
Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets & Cyber Unit, stated that the companies “sought profits for themselves by exposing investors to substantial, undisclosed risks through misrepresentations about the safety of the investment.”
While not admitting or denying the allegations, TrueCoin and TrustToken have agreed to settle the charges. Each company will pay a civil penalty of $163,766. Additionally, TrueCoin has agreed to pay disgorgement of $340,930 plus $31,538 in prejudgment interest. These settlements are pending court approval.
This case adds to the SEC’s recent surge in regulatory enforcement against cryptocurrency companies. High-profile cases involving Binance, Coinbase, and Kraken have brought increased scrutiny to the industry. These firms have faced charges ranging from the unregistered sale of securities to misleading investors about the safety of their assets.
This development arrives just as the crypto industry prepares for Benzinga’s Future of Digital Assets conference on Nov. 19. The SEC’s actions underscore the evolving regulatory landscape and the need for transparency and accountability within the crypto sector.
