The firms behind TrueUSD, a USD-pegged stablecoin, have been charged by the U.S. Securities and Exchange Commission.
The firms behind TrueUSD, a USD-pegged stablecoin, have been charged by the U.S. Securities and Exchange Commission. On Tuesday, the SEC announced charges against TrueCoin LLC and TrustToken Inc. for fraud and unregistered sales of investment contracts, casting doubt on the safety and backing of the dollar-pegged digital asset.
The regulator accused both firms of making misleading claims about the backing of TUSD, calling it a "purported stablecoin." Both companies placed a large chunk of TUSD's reserves in a "highly speculative and illiquid offshore investment fund" in an effort to inflate returns, the SEC said.
Jorge G. Tenreiro, Acting Chief of the SEC's Crypto Assets & Cyber Unit said, "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."
The complaint filed by the SEC also alleges that TrueCoin and TrustToken knew about various issues related to redemptions regarding the offshore fund but nonetheless continued to invest TUSD's backing in the venture. At one point in time, according to the regulator, 99% of the backing of TUSD was invested in this unnamed fund, supposedly focused on "trade finance" and related investments.
The allegations notwithstanding, the companies have agreed to settle the charges without admitting or denying any wrongdoing and will pay, collectively, an approximate $700,000 penalty under the settlement.
This move comes when the market position of TUSD had already been under pressure. The market capitalization of the stablecoin has dived 86% from its high of nearly $3.8 billion last October to around $500 million today. That coincided with changes in Binance's zero-fee trading policies, which up until then had given prominence to TUSD in the market for stablecoins.
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