SEC files lawsuit against team behind TrueUSD stablecoin and imposes $700,000 fine

The official announcement pointed out that relevant supporters of the TrueUSD (TUSD) stablecoin were suspected of misleading investors and falsely stated the stability of the token.

According to the complaint filed in the U.S. District Court for the Northern District of California, TrueCoin and TrustToken engaged in the offer and sale of unregistered investment contracts in the form of the crypto asset TUSD. They also covered “profit opportunities” related to TrueUSD from November 2020 to April 2023.

Jorge G. Tenreiro, acting head of the SEC’s crypto unit, stressed the importance of registration to avoid depriving investors.

Securities regulators have called TrueUSD a “so-called stablecoin” for falsely marketing the investment opportunity as safe and secure.

According to the complaint, backers claim that TUSD is fully backed by U.S. dollars or its equivalent. However, a significant portion of the assets backing TUSD are invested in a speculative and risky offshore investment fund.

The complaint mentioned that in March 2022, an offshore entity and TrueCoin invested more than $500 million in assets supporting TrueUSD in the speculative fund.

Additionally, 99% of the reserves backing TUSD will be invested in the speculative fund through September 2024.

TrueCoin and TrustToken have not denied or admitted the SEC’s allegations. They have agreed to settle the regulator's charges with each company paying a civil penalty of $163,766. In addition, TrueCoin agreed to pay a recovery payment of US$340,930 and prejudgment interest of US$31,538.

The TrueUSD stablecoin has a market capitalization of $495 million, recovering slightly after the news was announced.