TrustToken and TrueCoin have reached a $700,000 settlement with the US Securities and Change Fee (SEC) after being accused of defrauding traders of stablecoin TrueUSD (TUSD).
The SEC’s criticism, filed on Tuesday, alleges that the corporations despatched TUSD’s greenback backing to “a speculative and risky offshore commodity fund” and that after TrueUSD was acquired by Techteryx in late 2020, TrueCoin remained concerned within the stablecoin’s operations till July 2023. Throughout that interval, the SEC believes the corporations continued to insist that TUSD was backed “one-for-one by US dollars.”
This settlement doesn’t embody TrueCoin and TrustToken admitting or denying the allegations contained within the criticism.
Learn extra: What’s up with TrueUSD and the remainder of TrustToken’s stablecoins?
“By the fall of 2022, TrueCoin and TrustToken became aware of redemption problems at the commodity fund,” the criticism continues. Regardless of allegedly changing into conscious of those points, the corporations continued to characterize TUSD as “backed dollar-for-dollar.”
Moreover, TrueCoin is alleged to have obtained “a portion of the interest earned on the TUSD reserves” from Techteryx.
This fund was apparently investing in a Hong Kong belief, 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 notice that it was “speculative” and said that it was solely appropriate for many who might “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 seems to be offered by First Digital Belief in Hong Kong, a long-time TrueUSD accomplice.
Learn extra: TrueUSD financial institution FlowBank compelled out of business
Funds held at First Digital Belief are at the moment described within 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 provides its personal stablecoin, First Digital USD (FDUSD), which claims to be “a 1:1 USD-backed stablecoin.”
- The criticism additionally cites TrueFi (a not-really-DeFi lending market the place traders might lend TUSD) as proof that TUSD was supplied and offered as a safety.
- Alameda Analysis was one of many lead traders within the TRU token, which had some utility in TrueFi.
As a part of the settlement with the SEC, TrueCoin and TrustToken have agreed to $163,766 in civil penalties every. TrueCoin has additionally agreed to $340,930 disgorgement with a prejudgement curiosity of $31,538.
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