TrueUSD (TUSD), a stablecoin pegged to the U.S. dollar, experienced a price dip following accusations from the U.S. Securities and Exchange Commission (SEC) against TrueCoin LLC and TrustToken Inc.
According to the SEC, the trust has committed fraud and issued unregistered securities concerning TUSD. As a result, the price of TUSD fell below its $1 peg. It traded at $0.9989, with market sentiment leaning towards bearish.
SEC Accusations Impact TrueUSD Stability
The investigations conducted by the SEC showed that from November 2020, TrueCoin and TrustToken offered unregistered investment contracts in TUSD. Investors were made to believe that TUSD was fully backed by the U.S. dollar.
Nevertheless, in the course of its investigation, the SEC identified that a significant percentage of TUSD funds had been invested in risky offshore funds. These funds were never disclosed to investors. By September 2024, 99% of the assets supposedly backing TUSD were tied up in these risky investments.
Such exposures have destabilized the market confidence. It resulted in a decline in the TUSD price. As a stablecoin designed to maintain a 1-1 peg with the US dollar, TUSD has faced considerable scrutiny regarding its collateralization and security after the revelations made by the SEC.
These charges triggered some small fraction loss of TUSD’s value, bringing it below its $1 peg to $0.9989. However, it is a sign of rising concern among investors.
The SEC’s complaint also highlights how TrueCoin and TrustToken continued to make false claims about TUSD’s backing, even after becoming aware of redemption issues in the fall of 2022.
Instead of alerting the investors, the companies continue to promote the scam by investing in massive advertisement campaigns that claim that TUSD is a secure and fully backed digital currency. This has upset and alarmed the crypto community, and at present, 69% of market participants regarded stablecoin bearishly.
Longstanding Issues with TUSD
These recent accusations by the SEC are not the first time TUSD has been in trouble. The stablecoin depegged in June 2023 after halting minting via its custodian, Prime Trust, that same month having suffered liquidity stress.
TUSD also depegged in January 2024 due to significant selling pressure and the inability to offer instant proof of its reserve audit. These situations contributed to doubts over the real degree of over-collateralization supporting the coin.
Binance, also joined the trend by removing several TUSD trading pairs in March 2024. While TUSD has not been ejected from the exchange, the delistings indicated that users have little confidence in its stablecoin to hold up for $1 after numerous operational and regulatory hitches.
SEC Settlement and Future Outlook
In response to the SEC accusations, both TrueCoin and TrustToken have willingly entered into a settlement. They have been ordered to pay $163,766 in civil penalties. TrueCoin also agreed to return $340,930 in disgorgement and prejudgment interest of $31,538.
Regarding the further development of TUSD for now it is still unclear and the market will be waiting for further signals of the stablecoin’s volatility.
