TrustToken and TrueCoin have reached a $700,000 settlement with the US Securities and Exchange Commission (SEC) after being accused of defrauding investors of stablecoin TrueUSD (TUSD).
The SEC’s complaint, filed on Tuesday, alleges that the firms sent TUSD’s dollar backing to “a speculative and risky offshore commodity fund” and that after TrueUSD was acquired by Techteryx in late 2020, TrueCoin remained involved in the stablecoin’s operations until July 2023. During that period, the SEC believes the firms continued to insist that TUSD was backed “one-for-one by US dollars.”
This settlement does not include TrueCoin and TrustToken admitting or denying the allegations contained in the complaint.
Read more: What’s up with TrueUSD and the rest of TrustToken’s stablecoins?
“By the fall of 2022, TrueCoin and TrustToken became aware of redemption problems at the commodity fund,” the complaint continues. Despite allegedly becoming aware of these issues, the firms continued to represent TUSD as “backed dollar-for-dollar.”
Additionally, TrueCoin is said to have received “a portion of the interest earned on the TUSD reserves” from Techteryx.
This fund was apparently investing in a Hong Kong trust, which invested in “trade finance, structured trade, export finance, import finance, supply chain financing, and project financing of entities.” Allegedly, a memorandum for this fund included a note that it was “speculative” and stated that it was only suitable for those who could “bear the risk of losing most or all of their investment.”
By September 2024, “more than 99% of the assets backing TUSD were invested in the risky Commodity Fund.” The fund appears to be provided by First Digital Trust in Hong Kong, a long-time TrueUSD partner.
Read more: TrueUSD bank FlowBank forced into bankruptcy
Funds held at First Digital Trust are currently described in the attestations for TrueUSD as invested “in other instruments to generate yield, which are made up of investments that may not be readily convertible to cash, subject to market conditions or fund performance.”
First Digital offers its own stablecoin, First Digital USD (FDUSD), which claims to be “a 1:1 USD-backed stablecoin.”
The complaint also cites TrueFi (a not-really-DeFi lending market where investors could lend TUSD) as evidence that TUSD was offered and sold as a security.
Alameda Research was one of the lead investors in the TRU token, which had some utility in TrueFi.
As part of the settlement with the SEC, TrueCoin and TrustToken have agreed to $163,766 in civil penalties each. TrueCoin has also agreed to $340,930 disgorgement with a prejudgement interest of $31,538.
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TrueUSD公司透過與SEC和解避開詐欺指控