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Half a billion dollars are swirling around the crypto world under the TrueUSD banner, but a dark secret may lurk beneath its supposed stability. The SEC alleges a tale of deception so egregious, it could be a masterclass in “How Not to Manage a Stablecoin.”
Imagine a house of cards built on shaky foundations: phony reports, hidden ownership, and a reckless gamble with the very assets meant to back the token—all allegedly tucked away within TrueUSD’s opaque structure.
But wait, there’s a catch! This isn’t a detective novel; it’s the frustrating reality of an ambiguous SEC settlement. No confirmation, no denial, just a cloud of doubt left hanging over TrueUSD and investor protection left wanting.
A shocking revelation has emerged from the SEC’s complaint against TrueUSD. The team behind this once-promising stablecoin has allegedly been orchestrating a massive deception.
The heart of the scheme lies in the “commodity fund,” a shadowy entity established in March 2020. While the team publicly assured users of a 1-to-1 dollar backing, they were secretly diverting funds into this high-risk venture.
The red-shaded area on the chart above underscores the alarming timeline of this alleged fraud. As of this month, a staggering 99% of the TUSD backing is trapped in this illiquid fund, exposing the true nature of the deception.
The TrueUSD team’s alleged misuse of user funds has cast a shadow over the stablecoin industry. Despite raising $12.5 million from prominent investors like a16z, BlockTower, and Alameda Research in August 2021, the team allegedly diverted funds into a high-risk commodity fund starting in March 2020. This alleged misappropriation occurred while the team publicly assured users of a 1-to-1 dollar backing.
Source: create.vista.com
While it’s common for stablecoin issuers to invest backing funds in external vehicles, typically in highly liquid assets like US Treasuries, the TrueUSD team’s alleged choice of illiquid assets raises serious concerns. This incident underscores the importance of transparency and accountability in the crypto industry and highlights the need for rigorous due diligence by investors.
The crypto market has seen its share of high-profile scandals, from the 2018 ICO boom to the recent collapse of FTX. While many of the key players involved in these past frauds have faced legal consequences, the future of the industry may bring a different kind of challenge.
As the low-hanging fruit of overt fraud is addressed, the industry may transition to a more subtle form of deception. With the threat of severe punishment looming, outright scams could become less prevalent. Instead, we may see a rise in more sophisticated tactics, such as misleading marketing, false promises, and opaque financial practices.
To truly clean up the crypto space, we must prioritize radical transparency. This means going beyond surface-level attestations and flimsy proofs. By embracing on-chain and off-chain transparency, we can empower users to make informed decisions and hold projects accountable. While the past has been marred by scandals, the future of crypto depends on our ability to learn from these mistakes and build a more trustworthy industry.
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