SEC Penalizes TrueUSD Backers with $700K Fine Over Investor Misrepresentation

SEC Penalizes TrueUSD Backers with $700K Fine Over Investor Misrepresentation

The US Securities and Exchange Commission (SEC) has imposed a $700,000 penalty on TrueCoin and TrustToken, the entities behind the TrueUSD stablecoin, for misleading investors about the token's backing and stability.

According to a complaint filed in the Northern District of California, the companies engaged in the unregistered sale of investment contracts linked to TrueUSD from November 2020 to April 2023. The SEC accused them of promoting the stablecoin as fully backed by US dollars, while a large portion of the reserves was actually invested in a high-risk offshore fund.

By March 2022, more than half a billion dollars backing the stablecoin had been funneled into this speculative fund. Despite knowing of redemption issues within the fund, the firms continued to falsely assure investors of TrueUSD’s one-to-one backing with US dollars. By September 2024, almost all of the reserves supporting the stablecoin were tied to the risky investment.

TrueCoin and TrustToken agreed to settle with the SEC, with each paying civil penalties of $163,766. Additionally, TrueCoin will pay a disgorgement of $340,930 along with $31,538 in interest. The companies did not admit to or deny the charges.

Despite the settlement, the TrueUSD stablecoin, which has a market cap of $495 million, has shown resilience, currently trading at $0.99.