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Writer's pictureStephen Wick

SEC Accuses TrustToken & TrueCoin of Fraud in Stablecoin Investment Scheme, Along with Unregistered Securities Sales

The complaint also claims that TrueCoin and TrustToken misrepresented the investment opportunity as secure and reliable, asserting that TUSD was entirely backed by U.S. dollars or their equivalents.

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The Securities and Exchange Commission has announced that it has reached a settlement with TrueCoin LLC and TrustToken Inc. regarding their fraudulent and unregistered sales of investment contracts tied to TrueUSD (TUSD), which is claimed to be a stablecoin.


The SEC's complaint, submitted in the U.S. District Court for the Northern District of California, identifies TrueCoin as the issuer of TUSD and TrustToken as the developer and operator of TrueFi, a lending protocol. The complaint states that from November 2020 to April 2023, both TrueCoin and TrustToken participated in the unregistered offering and sale of investment contracts related to the crypto asset TUSD, as well as profit-making opportunities associated with TrueUSD on the TrueFi platform.


“TrueCoin and TrustToken sought profits for themselves by exposing investors to substantial, undisclosed risks through misrepresentations about the safety of the investment,” said Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets & Cyber Unit.


The complaint also claims that TrueCoin and TrustToken misrepresented the investment opportunity as secure and reliable, asserting that TUSD was entirely backed by U.S. dollars or their equivalents. In reality, a significant portion of the assets that were said to support TUSD had been funneled into a high-risk offshore investment fund to generate extra profits for the defendants.


According to the complaint, by around March 2022, after the TUSD operations were transferred to an offshore entity, that entity and TrueCoin had allocated over half a billion dollars of the assets supposedly backing TUSD into this speculative fund.


Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets & Cyber Unit added, “This case is a prime example of why registration matters, as investors in these products continue to be deprived of the key information needed to make fully informed decisions.”


Furthermore, by Fall 2022, TrueCoin and TrustToken were aware of issues with redeeming funds at the offshore investment but continued to mislead investors by claiming that TUSD was fully backed one-for-one by U.S. dollars. Allegedly, by September 2024, 99% of the reserves supporting TUSD were tied up in this speculative fund.


TrueCoin and TrustToken have reached a settlement regarding the SEC's charges, neither admitting nor denying the allegations. They have consented to final judgments that prohibit them from breaching relevant federal securities laws and will each pay civil penalties of $163,766. Additionally, TrueCoin will pay $340,930 in disgorgement along with prejudgment interest amounting to $31,538. These settlements are pending court approval.


The SEC's ongoing investigation is being led by Michael C. Baker, Michael Friedman, Pasha Salimi, and Bryan Hsueh, with oversight from Michael Brennan, James Connor, and Mr. Tenreiro.






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