Gairika Mitra
The Securities and Exchange Commission (SEC) on Tuesday imposed hefty penalties on TrueCoin LLC and TrustToken Inc. for their fraudulent and unregistered sales of investment contracts tied to the purported stablecoin TrueUSD (TUSD).
In a complaint filed with the U.S. District Court for the Northern District of California, the SEC reported that TrueCoin and TrustToken engaged in an unregistered offer between November 2020 and April 2023. It also alleged the sale of investment contracts through TUSD and profit-making opportunities on TrueFi.
The companies purportedly marketed TUSD as a safe and trustworthy investment, claiming that US dollars or their equivalent backed it. However, the SEC alleged that a substantial portion of the assets supposedly backing TUSD had been funneled into a risky offshore investment funds to help generate additional returns for the defendants.
TrueCoin and TrustToken Misled Investors
By March 2022, after TrueCoin sold TUSD operations to an offshore entity, the company invested more than half a billion dollars of the purported reserves in this speculative fund. Despite redemption issues at the offshore fund coming to light by fall of 2022, TrueCoin and TrustToken allegedly continued with their misleading activities. The companies claimed that one-for-one by U.S. dollars backed the TUSD. The deception escalated, with 99% of TUSD’s reserves invested in the speculative fund by September 2024.
“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, the acting chief of the SEC’s Crypto Assets & Cyber Unit. “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,” he added.
As of this writing, without admitting or denying the allegations, TrueCoin and TrustToken agreed to settle the charges. They consented to final judgments enjoining them from violating federal securities laws and agreed to pay civil penalties of $163,766 each.
Additionally, TrueCoin will pay a disgorgement of $340,930 with a prejudgment interest of $31,538. The settlements are pending court approval.
Previously, federal prosecutors formally charged two individuals with stealing over $230 million in cryptocurrencies. Blockchain investigator ZachXBT uncovered the charges.
In another instance, The U.S. Court of Appeals for the Third Circuit seemed unconvinced by the SEC’s decision to reject Coinbase’s request for crypto-specific rulemaking.
Coinbase had petitioned the SEC in July 2022, seeking clear rules for securities traded via digital methods. After the SEC denied the request in late 2023, Coinbase turned to the court, asking it to require the regulator to provide a more thorough explanation.
Read More
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Gairika holds positions in BTC. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.
