News

TrueUSD Stablecoin Not Fully Backed by US Dollar

Key Points:

The SEC settled charges against TrueCoin and TrustToken for fraudulently marketing the TrueUSD stablecoin as fully backed by U.S. dollars.
The companies did not admit wrongdoing but agreed to pay civil penalties.

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.

SEC Settles Fraud Charges Against TrueUSD Stablecoin Issuers

According to Bloomberg, 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.

Between November 2020 and April of this year, TrueCoin and TrustToken sold unregistered investment contracts linked to the TrueUSD stablecoin via 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.

Market Value of TrueUSD Drops, Raises Regulatory Concern

Even though the firm became aware of the potential redemption issues by fall 2022, 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, by March 2022, took control of its ownership structure amid poor banking conditions for crypto businesses in the United States following successive collapses of several financial institutions.

Currently, it is not that common, since less than half a billion dollars in TrueUSD circulates in the market, compared to its more-than-$4-billion high.

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Harold

With a passion for untangling the complexities of the financial world, I've spent over four years in financial journalism, covering everything from traditional equities to the cutting edge of venture capital. "The financial markets are a fascinating puzzle," I often say, "and I love helping people make sense of them." That's what drives me to bring clear and insightful financial journalism to the readers of Coincu.