In a recent development reported by Bloomberg, TrueCoin and TrustToken have reached an in-principle settlement with the U.S. Securities and Exchange Commission (SEC) concerning misleading statements about the backing of their TrueUSD stablecoin. Dated September 24, the settlement follows an investigation that revealed significant discrepancies in the claims of TrueUSD’s full collateralization by U.S. dollars.
The SEC's complaint, filed in the District Court for Northern California, alleged that TrueCoin and TrustToken misrepresented the stability of TrueUSD. Contrary to their claims of full backing by U.S. dollars, a substantial portion of the stablecoin's reserves was instead invested in a high-risk offshore fund. Between November 2020 and April 2023, the companies sold unregistered investment contracts linked to TrueUSD through a lending protocol known as TrueFi, which promised profit opportunities to investors.
While TrueCoin and TrustToken have not admitted or denied the charges, they have agreed to pay civil penalties of $163,766 each, along with a disgorgement of $340,930 plus prejudgment interest. The settlements are now pending court approval.
The settlement comes at a time of increased scrutiny over stablecoins and their operational practices. Following the SEC’s findings, regulatory concerns regarding TrueUSD have intensified. As of September 2024, the SEC reported that 99% of TrueUSD’s backing remained invested abroad, despite the firm being aware of potential redemption issues as early as fall 2022.
Moreover, TrueUSD’s operations were sold to an offshore entity called Techteryx, which took control of its ownership structure in March 2022. This transfer occurred amidst a challenging banking environment for cryptocurrency businesses in the United States, which saw the collapse of several financial institutions.
The market value of TrueUSD has also taken a hit. Once peaking at over $4 billion, the circulating supply of TrueUSD has plummeted to less than half a billion dollars, raising further questions about its viability and trustworthiness as a stablecoin.
As the cryptocurrency market grapples with regulatory challenges and trust issues, the TrueUSD case serves as a cautionary tale for investors and issuers alike. The ongoing scrutiny by regulatory bodies highlights the need for transparency and adherence to financial regulations in the rapidly evolving landscape of digital assets. As the situation develops, it will be crucial for stakeholders to monitor how these settlements impact the future of TrueUSD and the broader stablecoin market.
September 2024, Cryptoniteuae