The post SEC Charges TrueCoin and TrustToken Over TrueUSD Stablecoin Fraud and Misrepresentation appeared on BitcoinEthereumNews.com.

The United States Securities and Exchange Commission (SEC) has brought charges against TrueCoin LLC and TrustToken Inc. for fraudulent and unregistered sales of investment contracts related to the TrueUSD (TUSD) stablecoin. The SEC alleges that the two companies made false marketing claims concerning the safety and backing of the TUSD stablecoin. “TrueCoin and TrustToken sought profits for themselves by exposing investors to substantial, undisclosed risks,” said Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets & Cyber Unit. “The SEC has charged TrueCoin LLC and TrustToken Inc. with engaging in fraudulent practices related to their TrueUSD stablecoin, leading to significant penalties.” SEC Accusations Against TrueUSD Stabilize Market Sentiments The SEC has accused TrueCoin LLC and TrustToken Inc. of misleading investors through false claims about the stability and security of TUSD. According to the SEC, the companies allocated a significant portion of TUSD’s backing to a risky offshore investment fund, contrary to their public assertions of one-for-one backing by U.S. dollars. This act jeopardized investors’ interests and violated securities regulations. Hidden Risks and Market Reactions The SEC alleged that the companies knew about the redemption issues related to the offshore fund but continued to allocate TUSD’s backing to this speculative investment. At one point, 99% of TUSD’s backing was reportedly tied up in this fund. This information, kept from investors, resulted in substantial risk exposure. The market’s reaction to these controversies saw TUSD’s market capitalization plummet from a high of $3.8 billion last October to around $500 million presently. Binance’s decision to limit zero-fee trading pairs with TUSD further reflected the shaken confidence in the stablecoin. Historical Context of Legal Actions Against Stablecoins The SEC has a history of regulating stablecoins to align them with investor protection laws. For example, Terraform Labs’ TerraformUSD (UST) was earlier declared a security, resulting…

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Filed under: News - @ September 25, 2024 12:26 am