The Securities and Exchange Commission (SEC) recently announced settled charges against two entities for fraudulent and unregistered sales of investment contracts involving TUSD, a purported stablecoin. According to the press release, one of the entities was the issuer of the purported stablecoin and the other was a developer and operator of a lending protocol. The SEC's press release alleges false marketing about an investment opportunity that was purportedly backed by U.S. dollars or their equivalent, when, in fact, the assets backing the investment were invested in a speculative and risky offshore investment fund in order to earn returns for the defendants. As much as 99 percent of the stablecoin reserves were invested in the offshore fund by September 2024, the SEC alleges, which exposed investors to substantial undisclosed risks. Both defendants consented to an injunction against further violations of the federal securities laws and to paying a fine of nearly $164,000 each as well as disgorgement by the issuer.
The Commodity Futures Trading Commission (CFTC) recently announced filed charges against four entities for failure to register as futures commission merchants (FCMs), seeking an order to cease and desist from violations of the Commodity Exchange Act and CFTC regulations. The press release says that each of the four entities offered CFTC-regulated products (binary options on the value of commodities such as foreign currencies and cryptocurrencies), handled customer funds and falsely claimed to be registered with the CFTC. At the end of the press release, the CFTC urged the public to verify CFTC registration status before committing funds.
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