SEC Charges TrustToken And TrueCoin With Fraud And Unregistered Securities Offering In Stablecoin Case

The U.S. Securities and Exchange Commission (SEC) has filed charges against crypto companies TrustToken Inc. and TrueCoin LLC for allegedly defrauding investors and conducting unregistered sales of investment contracts involving the TrueUSD TUSD/USD stablecoin.

What Happened: 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 invested in a “speculative and risky offshore investment fund.”

By September 2024, the complaint alleges that 99% of TUSD’s reserves were invested in this fund.

Also Read: Bitwise CIO Matt Hougan: ‘The Most Powerful People In Finance Are Allocating To Crypto’

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.”

Without admitting or denying the allegations, TrueCoin and TrustToken have agreed to settle the charges.

Each company will pay a civil penalty of $163,766, with TrueCoin additionally agreeing to pay disgorgement of $340,930 plus $31,538 in prejudgment interest. The settlements are pending court approval.

In recent months, the SEC has ramped up its regulatory enforcement against cryptocurrency companies, with high-profile cases involving Binance, Coinbase, and Kraken drawing significant attention.

These firms have faced charges ranging from the unregistered sale of securities to misleading investors about the safety of their assets.

What’s Next: The timing of this case is particularly relevant as the crypto industry prepares for Benzinga’s Future of Digital Assets conference on Nov. 19.

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