SEC Reveals Risky Investments Behind TUSD Stablecoin
The SEC revealed that nearly all of TrueUSD's reserves were invested in a risky offshore fund, leading to charges against TrueCoin and TrustToken.
The U.S. Securities and Exchange Commission (SEC) revealed that TrueCoin LLC and TrustToken Inc., the creators of the TrueUSD (TUSD) stablecoin, had invested almost all of their reserves in a high-risk offshore fund. This discovery led to charges of fraudulent and unregistered sales of investment contracts, which the companies have settled without admitting or denying the allegations.
According to the SEC, TrueCoin and TrustToken falsely claimed that TUSD was fully backed by U.S. dollars, misleading investors about the safety of their funds. From November 2020 to April 2023, the companies sold TUSD through their TrueFi lending platform, advertising it as a secure, dollar-backed investment. In reality, these reserves were placed in speculative investments that exposed investors to significant risks.
By March 2022, more than $500 million meant to back TUSD had been diverted to this risky fund. Despite difficulties with redemptions that surfaced by the fall of 2022, TrueCoin and TrustToken continued to mislead investors. By September 2024, a staggering 99% of TUSD’s reserves were tied to this speculative fund. SEC Acting Chief of the Crypto Assets & Cyber Unit, Jorge G. Tenreiro, stated that the companies sought profits while endangering investors' capital through false claims about the stability of the investment.
Responding to the SEC’s findings, both companies agreed to settle. They will face penalties and are barred from future violations of securities laws. TrueCoin will pay $340,930 in disgorgement, with an additional $31,538 in interest, pending court approval. Both companies have also agreed to pay civil penalties of $163,766 each.
This case adds to the SEC’s broader crackdown on the crypto industry, which saw a record $4.68 billion in fines collected in 2024. At a congressional hearing, lawmakers questioned SEC Chairman Gary Gensler on the agency’s approach to digital asset regulation. Committee Chairman Patrick McHenry accused the SEC of overreach and criticized Gensler’s leadership for turning the agency into what he called a "rogue" regulator.
