SEC Reaches Settlement Over Fraud Claims Against Archblock and TrueUSD

SEC Settles Fraud Case Involving TrueUSD Stablecoin

The U.S. Securities and Exchange Commission (SEC) has officially settled allegations against firms associated with Archblock and the TrueUSD (TUSD) stablecoin. These companies were accused of fraud and of offering securities linked to TUSD without the required registration with the SEC.

Companies Involved and Settlement Details

TrustToken and TrueCoin, which have been rebranded to Archblock, were at the center of these accusations. The settlement has revealed that they misrepresented the backing of the TrueUSD stablecoin. Specifically, the SEC alleged that they falsely claimed that TUSD had one-to-one dollar reserves. Instead, the issuer was investing these reserves in a speculative offshore commodity fund, significantly increasing the risk of the asset.

As a part of the settlement, both companies agreed to pay fines of $163,766 each. Furthermore, TrueCoin will return approximately $400,000 in profits and interest, which is pending approval by a federal court. The companies have also made a commitment not to violate relevant securities laws in the future.

Background and Market Impact

TrueCoin was originally the issuer of TUSD, which is currently managed by an offshore firm called Techteryx and has a market capitalization of nearly half a billion dollars. It's important to note that TrustToken operated a lending protocol known as TrueFi. The entities involved in this settlement are accused of engaging in unregistered offers and sales of securities regarding TUSD via TrueFi.

The SEC's complaint highlighted that the companies remained closely associated with the asset, despite transferring the stablecoin's issuance to another company. It also noted that TrueCoin was partly responsible for creating and managing content on the TrustToken website, which included links to purchase TUSD and invest in TrueFi.

Concerns Over Redemption Issues

It was reported that both companies were aware of redemption challenges with TUSD as early as 2022. These issues raised questions about the transparency and reliability of the stablecoin, prompting regulatory scrutiny.

Archblock has yet to respond to requests for public commentary regarding the settlement.

Conclusion

This settlement serves as a reminder of the ongoing scrutiny over cryptocurrencies and stablecoins by regulatory bodies. Companies in the crypto space must ensure they comply with securities laws to avoid similar disputes in the future.