The U.S. Securities and Exchange Commission (SEC) has accused two crypto companies, TrustToken Inc. and TrueCoin LLC, of tricking investors and selling financial products without proper approval.
The SEC stated that between November 2020 and April 2023, these companies sold an investment called TrueUSD (TUSD) and offered ways for people to make money through TrueFi, a lending platform.
Per the SEC, the companies allegedly lied to investors, claiming that TUSD was fully backed by U.S. dollars. In reality, much of the money backing TUSD was invested in a risky fund outside the U.S. By March 2022, over $500 million of the backing money was in this risky fund, and by September 2024, almost all of TUSD’s reserves were tied up in this fund.
Even when the companies knew about problems with this offshore fund in late 2022, the SEC said they kept telling investors that TUSD was fully backed by dollars, which wasn’t true.
To resolve the case, the companies agreed to pay fines without admitting or denying guilt. TrustToken and TrueCoin will each pay $163,766, and TrueCoin will pay back an additional $340,930 plus interest. The court still has to approve these settlements.
The SEC stressed that companies must follow the rules and give honest information to investors. This case is part of the SEC’s increased efforts to regulate the cryptocurrency industry, especially focusing on unregistered sales and misleading claims to investors.
TrueCoin LLC issued a stablecoin called TrueUSD (TUSD). While TrueCoin created TUSD, TrustToken developed and operated TrueFi, a platform for lending and borrowing using cryptocurrencies.
The SEC has ramped up enforcement cases related to cryptocurrencies. In 2023, it brought 46 cases, a 53% increase from 2022. These included both lawsuits and administrative actions, with 26 lawsuits and 20 administrative cases in 2023 alone.
One of the most prominent cases involved Ripple Labs, which was sued in 2020 for allegedly selling unregistered securities through its XRP token. This case significantly impacted the crypto market, as XRP is one of the largest cryptocurrencies.
In 2024, Terraform Labs and its founder, Do Kwon, were fined $4.68 billion for violating securities laws, mainly due to the collapse of their stablecoin, TerraUSD. This collapse led to significant investor losses and drew intense SEC scrutiny.
The SEC has also taken action against Coinbase, accusing the company of running an unregistered exchange, broker, and clearing agency. Similarly, Binance, the world’s largest crypto exchange, faced charges in 2023 for allegedly violating U.S. securities laws and misleading investors.
However, the SEC’s aggressive approach has been criticized by some people, who say it creates confusion and uncertainty. Some believe the SEC should give clearer rules instead of relying on enforcement actions. One of SEC’s latest actions was issuing a Wells Notice to the NFT marketplace, Opensea.
