The U.S. Securities and Exchange Commission (SEC) has charged two cryptocurrency firms, TrustToken and TrueCoin, with securities violations related to their involvement with the TrueUSD (TUSD) stablecoin. The SEC accused the companies of offering unregistered securities and investment contracts between November 2020 and April 2023.
The complaint, filed on September 24, alleges that the companies misled investors through marketing tactics that promoted TUSD and TrueFi, a decentralized finance (DeFi) lending platform, as “safe and trustworthy” investments. TrustToken is the creator of TrueFi, a platform allowing users to utilize TUSD, which was issued by TrueCoin.
SEC Charges TrustToken and TrueCoin with Investor Fraud
Jorge G. Tenreiro, the acting Chief of the Commission’s Crypto Assets and Cyber Unit, emphasized the need to enforce market participants’ registration as a means of investor protection. He observed that the case bears out the Commission’s efforts to ensure that the cryptocurrency industry functions within the law’s parameters.
TrustToken and TrueCoin took no responsibility for the charges against them and neither accepted nor disputed the allegations. Both expressed their willingness to enter into a settlement with the payment of $163,766. Further, TrueCoin was also ordered to pay extra on top of the fines and disgorge $340,930.
The settlement is among many settlements increasingly registered by the SEC for cryptocurrency business entities already up to paying more than Seven billion dollars in fines in the past 12 years. Last week press reports featured information indicating that penalties in the crypto sector have gone over 3000% increase in the last year alone.
Sector institutionalization of the SEC in regulating crypto has remained rather controversial, with several stakeholders, including Dan Gallagher, a Chief attorney with Robinhood Markets and former SEC official, among others, raising questions on these measures. Thus, many experts are very critical of the SEC’s “regulation by enforcement” policy as causing some legal vagueness and, therefore, legal chaos. Even Commissioner Hester Peirce of the SEC has been quoted regarding the approach as wasteful.
In the ongoing confrontations between SEC and crypto companies, The appearance of this latest settlement exemplifies the strained relationship between regulators and the emergent digital asset industry.
