Cryptocurrency Firms Settle with SEC Over Unregistered Security Sales

TrustToken and TrueCoin Settle with SEC for Unregistered Securities Sales

In a significant development within the cryptocurrency sector, TrustToken and TrueCoin, the organisations behind the TrueUSD (TUSD) stablecoin, have recently joined the ranks of Cryptocurrency Firms Settle with SEC. The settlement addresses allegations that the firms engaged in fraudulent and unregistered sales of investment contracts linked to their TrueUSD and TrueFi lending protocol.In the Cryptocurrency Firms Settle with SEC case, TrustToken and TrueCoin agreed to pay a total of $700,000 in penalties and disgorgement, without admitting or denying the SEC’s allegations. This decision was part of a strategic move to avoid the complexities and distractions of prolonged litigation, allowing the companies to concentrate on future business ventures.

Details of the SEC Allegations

The SEC's complaint, filed in California, accused TrueCoin and TrustToken of conducting unregistered sales of TUSD between November 2020 and April 2023, falsely claiming full backing by US dollars. Instead, they invested a significant portion of assets in a speculative offshore fund, allocating over 99% of TUSD's reserves to this fund by September 2024, which exposed investors to hidden risks. Jorge G. Tenreiro, Acting Chief of the SEC's Crypto Assets & Cyber Unit, stressed the importance of registration to provide investors with the essential information needed for informed decisions.

Financial Repercussions and Future Compliance

As part of the settlement, TrueCoin and TrustToken were fined $163,766 each, while TrueCoin was also required to disgorge $340,930 plus interest. Both companies, therefore, agreed to injunctions against future securities law violations. The settlement, meanwhile, occurred amidst increased regulatory scrutiny, as the SEC has collected $4.68 billion in crypto fines in 2024. Following the settlement, TrueUSD briefly de-pegged but quickly stabilized, with its value fluctuating around $0.98, still remaining within its typical range. This case, thus, serves as a critical reminder of the importance of compliance with regulatory standards in the crypto industry.For further reading on the implications of regulatory actions in the crypto space, consider exploring our analysis on how the SEC is reshaping the crypto industry landscape.