Understanding TrueUSD's Reserves and Recent Settlements with the SEC
TrueUSD (TUSD) has recently come under scrutiny as investigations reveal significant details about its reserves and management. As noted by Odaily, it is reported that approximately 99.7% of TrueUSD's reserves are held by First Digital Trust, despite shadows cast by previous allegations in a recent settlement with the U.S. Securities and Exchange Commission (SEC).
Key Players and Allegations
Despite the revelation of these reserves, the settlement does not involve Techteryx, the current owner of TrueUSD. Techteryx has consistently denied claims that it is controlled by Justin Sun. This denial comes in the wake of allegations made by the former CEO of TrustLabs, who suggested that Sun attempted to acquire the company.
Audit Findings and Valuation Concerns
The audit conducted by Moore Hong Kong indicates that the investments within the TrueUSD fund are valued at "cost." Importantly, the procedures outlined in the audit do not include a review of the fair market value of these investments. This presents a concerning scenario: even if the fair value of the assets plunges to zero, the audit will continue to report values based solely on their original cost.
Liquidity and Cash Reserves
Techteryx's management has further noted that these assets "may not be easily convertible to cash," a statement that raises red flags depending on market conditions or fund performance. Currently, it's assessed that around $495 million of TUSD reserves comprise approximately $502 million held by First Digital, alongside around $1 million in cash.
SEC Settlement Overview
In late September, the SEC announced a settlement involving TrueCoin LLC and TrustToken Inc. following allegations related to the sale of TrueUSD. The SEC identified TrueCoin as the issuer of TUSD and TrustToken as the developer of the lending protocol TrueFi.
Financial Penalties and Allegations
Both companies neither admitted nor denied wrongdoing but agreed to pay fines of $163,766 each. Additionally, TrueCoin has agreed to pay $340,930 in disgorgement. Between November 2020 and April 2023, TrueCoin and TrustToken engaged in unregistered offerings and sales of investment contracts involving TUSD assets on TrueFi, falsely marketing them as safe and fully backed by U.S. dollars or equivalent assets.
Risky Investments and Future Implications
Contrary to their marketing claims, the SEC asserted that a significant portion of the TUSD assets was directed towards speculative and high-risk offshore investment funds in order to achieve additional returns. It has been alleged that by September 2024, a striking 99% of the foreign exchange reserves backing TUSD will be invested in these speculative funds.
Looking Ahead: What's Next for TrueUSD?
The revelations about TrueUSD's management and its financial dealings raise critical questions about the transparency and stability of the cryptocurrency. Investors must be cautious and remain aware of the risks associated with investing in stablecoins that may not offer the level of security that they purport to provide.
For additional insights on cryptocurrency trends and updates, please explore our articles on crypto investments and regulatory developments.
Call to Action: What are your thoughts on the future of TrueUSD and its implications for the cryptocurrency market? Share your comments below!
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