Hold onto your hats, folks! The SEC is coming in hot with some serious accusations against TrustToken and TrueCoin. These two crypto companies are in the hot seat for allegedly playing fast and loose with the funds backing their stablecoin, TrueUSD (TUSD).
Picture this: the SEC says these guys took 99% of the reserves that were supposed to back TUSD and threw them into a high-risk investment fund. Talk about a gamble! The SEC wasn't amused and slapped them with charges for running a fraudulent investment program and selling unregistered securities.
The drama unfolded in the U.S. District Court for the Northern District of California, where the SEC ordered TrueCoin and TrustToken to cough up $700,000 in penalties. TrustToken, the brains behind the TrueFi lending protocol, and TrueCoin, the issuer of TUSD, were accused of misleading investors big time.
TUSD hit the scene in 2018, and from November 2020 until April 2023, the SEC says these companies were offering profit-making opportunities disguised as stablecoins without proper registration. TrustToken even bragged about TUSD being the first USD-pegged stablecoin to provide daily reserve attestations from third-party institutions. But the SEC's complaint paints a different picture.
According to the SEC, TrustToken and TrueCoin falsely claimed that TUSD was fully backed by U.S. dollars. In reality, a huge chunk of those funds was invested in a speculative offshore scheme. The masterminds behind TrueFi used the USD reserves to place risky bets, hoping for big returns.
By the time they sold TUSD operations to an offshore entity in March 2022, they had already sunk over $500 million into this risky venture. Redemption problems surfaced later that year, but TrustToken and TrueCoin kept spinning tales about TUSD being backed 1:1 by USD, fooling investors.
Fast forward to September 2024, and the SEC says a whopping 99% of TUSD's reserves were tied up in that risky fund. Yikes! The companies have since settled with the SEC, agreeing to pay penalties and more.
“This case is a prime example of why registration matters,” said Jorge Tenreiro, acting chief of the SEC’s Crypto Assets & Cyber Unit. “Investors in these products need key information to make fully informed decisions.”
Meanwhile, the crypto world is abuzz, and some projects, like Curve Finance, are thinking twice about keeping TUSD as a collateral token after the SEC's bombshell indictment. Buckle up, because this story is far from over!
