Recently, the Securities and Exchange Commission (SEC) settled with TrustToken and TrueCoin, previous operators of TrueUSD (TUSD), over allegations that the firms sent the backing for the stablecoin to “a speculative and risky offshore commodity fund.” 

The fund, which invested in “trade finance, structured trade, export finance, import finance, supply chain financing, and project financing of entities,” appeared to be offered by First Digital Trust in Hong Kong. Allegedly, “more than 99% of the assets backing TUSD” were placed in the speculative fund.

Furthermore, the complaint alleges that in 2022, TrueCoin and TrustToken were aware of redemption issues at this fund.

Importantly, this settlement didn’t include Techteryx, the firm that now owns TrueUSD. This firm has repeatedly denied that it’s under the control of Justin Sun, described as an “Asia markets advisor” for TrueUSD, though the former chief executive of TrustLabs has claimed that Sun tried to acquire the firm.

A review of an attestation for TrueUSD reveals that approximately 99.7% of the reserves for this stablecoin are still held at First Digital Trust, despite the allegations in the previous SEC settlement.

Read more: TrueUSD bank FlowBank forced into bankruptcy

The attestation further notes that Moore Hong Kong, the firm behind it, valued investments in that fund “at cost” and makes sure to note that its “procedures do not include an examination over the fair market value of the investments within the Fund.”

This means that even if the fair value of assets in that fund had fallen to zero, this attestation would continue to report the value at cost invested.

Additionally, the notes from Techteryx management signed by Jennifer Jiang (also of Sun-affiliated BiT Global, Sun-owned Poloniex, Sun-advised HTX, and Sun-owned BitTorrent), also state that these assets “may not be readily convertible to cash, subject to market conditions or fund performance.”

Currently, the reserves for the approximately $495 million in TUSD are made up of approximately $502 million held at First Digital and approximately $1 million in cash. 

Protos has reached out to TrueUSD to determine which fund it is currently invested in, but it did not immediately respond.

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TrueUSD (TUSD), the Justin Sun-affiliated stablecoin, is currently experiencing a de-peg and trading below par on multiple centralized exchanges, including Binance, HTX, and KuCoin. This happened shortly after TrueUSD switched accounting firms from The Network Firm to Moore Hong Kong for its attestations. 

TrueUSD recently benefited from Binance adopting TUSD as one of its zero-fee trading pairs.

The currency is currently trading more than one cent below the peg on Binance, both against other stablecoins like Tether (USDT) and other cryptocurrencies. This pattern is repeated in DeFi, with Curve currently showing that you’ll lose more than one cent exchanging TUSD for USDT. 

Even on the Tron-based SunSwap, trading TUSD for USDT will result in you losing two pennies for each TUSD you swap.

New attestations

TrueUSD has switched from The Network Firm, started by former Armanino auditors, to the Hong Kong-based Moore office for these attestations. The new attestations provide additional insight into the purported reserves for TUSD.

The reserves in the report are broken into three different categories:

• US Treasury Bills
• First Digital Trust Limited
• US Dollars Cash

The US Treasury bills make up the bulk of the reserves, are supposedly accounted for at cost, and don’t seem to be marked-to-market.

The First Digital Trust Limited category describes securities that are held at First Digital Trust to earn yield; very little information is provided about these securities in the report. First Digital is also behind the new First Digital USD (FDUSD) stablecoin, which has become increasingly popular on Binance. 

Read more: TrueUSD attestations paused again, this time for improper ‘balances’

The US Dollars Cash category, which makes up only about 2% of the total, comprises funds held “at a Hong Kong depository institution, a Swiss depository institution, and Bahamian depository institutions.”

Techteryx, the firm behind TUSD, no longer discloses the identities of these firms, but historically it has relied on FlowBank in Switzerland, First Digital in Hong Kong, and Capital Union in the Bahamas. Additionally, the attestations warn that:

“On 21 April 2023, the agent of Techteryx opened a conventional corporate account with a Swiss depository institution with terms within the account’s ‘General Terms and Conditions’ (“Terms”) that do not explicitly specify that the related funds are escrowed on behalf of TrueUSD token holders or that Techteryx and the agents are not entitled to any funds at any time and no amounts deposited into the accounts shall become the property of Techteryx, the agents, or any other entity, or be subject to any debts, liens or encumbrances of any kind of Techteryx, the agents, or any other entity.

“Techteryx and its agents began utilizing the account starting on 13 June 2023, which maintained balances contributing to the total USD Denominated Collateral.”

Techteryx previously informed Protos that the relevant “Custody Agreement has been under legal review process by the Swiss bank which is beyond our direct control.”

It is currently not clear exactly which conditions are leading to this TUSD de-peg.

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Recently, the team behind TrueUSD was forced to disclaim TEURO — a token deployed at the same address — suggesting that private keys historically associated with its TUSD token have been compromised.

Funds related to this false token have also been tied to the deployment of TCNY, another apparently fake token unaffiliated with the ‘real’ TrueTokens. This comes as TrueUSD has had to disclose a hack of customer information.

This token was deployed by address 0x7bA7EF06A2621267f063eF2DB2d482D5B507D8b3, which does correspond to the address that originally deployed the TUSD contracts. However, TrueUSD now claims that this address “has NO permissions over TUSD smart contracts; it was exclusively designated for token deployment.”

The company also claims, “It holds NO authority over current TUSD contracts or user token assets and has NO impact on TUSD’s operations. This address is NOT owned or controlled by the TUSD team, and there is NO affiliation between the TUSD team and this address.”

The firm concludes, “Since the end of 2020, the TUSD team has gained ownership of the TUSD contract. Rest assured, your TUSD tokens are secured by our smart contracts, which are securely owned and managed by the TUSD team. Once again, the security of TUSD remains our top priority.”

This statement, in some sense, appears to contradict a previous claim from Monica Ho of Archblock to Protos, where she discussed how, for TrueUSD, “the private keys have been handed over to the Techteryx engineering team.” 

Independent crypto researcher ZachXBT tracked fund movements related to the deployment of TEURO, noting that one of the addresses that received TEURO bridged funds over to Arbitrum before bringing them back to Ethereum. The original TrueAUD deployer then created another fake token in TrueCNY.

Further complicating this story is the fact that TrueUSD recently had to disclose that it was compromised, tweeting, “TUSD team was informed by TrueCoin that they received a third-party vendor’s notification that the vendor’s Security Team detected ‘an anomalous’ account chance within [TrueCoin’s] organization made by a compromised support vendor.'” 

Blockchain intelligence firm ChainArgos highlighted how this represents a potentially larger attack on TrueUSD. It highlighted that TUSD allows for more ‘automated’ minting and redemption by users than many other stablecoins, potentially allowing hackers to quickly obtain funds related to the stablecoin. 

ChainArgos says a potential attack relies on the hacker being able to mint more TUSD into accounts and transfer them to the stUSDT mint address. That account was able to burn those TUSD, potentially redeeming those tokens and accessing those funds.

Read more: FTX knew Justin Sun tried to acquire TrueUSD

These transfers all happened before the disclosed hack date and rely on loss of control of keys, which so far hasn’t been disclosed. This means that these transfers could be related to non-hack activity by Justin Sun.

Protos has previously reported that stUSDT is almost entirely controlled via entities and addresses believed to be owned or controlled by Sun. 

Protos has reached out to TrueUSD with a series of questions to clarify the nature of this hack.

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This year, crypto entrepreneur Justin Sun has been on a streak of questionable decisions — but his brazenness seemingly became out of control on Friday, when he decided to mint over $800 million worth of his own stablecoin TUSD, put them into a lending protocol he named after himself, and burn them all.

Sun, a former Grenadian ambassador who has since seen that honor stripped away, raised eyebrows when he started multiple algorithmic stablecoins after the collapse of the Terra/Luna ecosystem. The Tron founder controversially decided to purchase crypto exchange Huobi and has been sued by the SEC for alleged market manipulation of his own tokens.

On Friday, however, Sun took the crypto cake by printing $815 million worth of his stablecoin TUSD. The funds were then sent to Sun-controlled Huobi — now curiously rebranded to HTX. These funds and an extra $40 million were then burned.

This caused a strange spike in the TUSD market cap. Only, the excitement didn’t end there; as pointed out by crypto sleuth DesoGames, the over $800 million in stables were used by Sun to print more stUSDT (or Staked USDT, another asset almost exclusively controlled by Sun), and then placed into JustLendDAO (which he also controls) to supposedly earn interest.

Read more: Where is Justin Sun’s money?

Nothing but t-bills, baby

On X, formerly Twitter, Sun was asked by Dylan LeClair to clarify the nature of TUSD reserves and where they were held, and to explain where its yield comes from.

LeClair received a one-word reply: “t-bills.”

At press time, Sun has failed to show what company has purchased these US treasury bills for TUSD, where their assets are being held, what durations these imagined ‘t-bills’ are, and how stUSDT is able to often offer yields higher than those offered by the US treasury.

In a statement to Blockworks, Sun said that the transactions were personal and had nothing to do with Huobi business.

“Printing! Moar!” Sun told the news outlet.

Update September 19, 8:40 UTC: Added credit and source to crypto sleuth DesoGames in fourth paragraph.

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It’s been almost a week since three of the four True stablecoins have been able to get attestations from The Network Firm, according to the Archblock website.

While the largest stablecoin under the Archblock brand — TUSD, or TrueUSD — is still getting real-time attestations, the other tokens (TAUD, TGBP, and TCAD) have had a management ‘ripcord’ pulled for their assets since June 22.

The management ripcord suggests that “during the last reporting interval, Management had un-acknowledged representations, assertions, or did not acknowledge the terms of the engagement.”

In simple terms, the information provided to the auditors wasn’t accurate or clear enough to provide a proper attestation.

All eyes on TUSD

The stablecoins unable to be attested for only amount to roughly $20 million. TUSD, the stablecoin still receiving attestations, accounts for over $3 billion in assets.

Over the past several weeks the TUSD stablecoin has been the source of rumors and controversy — from the fact that its market cap has exploded to the loss of one of its US dollar custodians, Prime Trust.

Protos previously reported on the convoluted and confusing messaging coming from both the Twitter account and the Archblock comms team, which has simultaneously suggested that withdrawals and deposits have been unaffected while sending out emails to customers explaining that they “will be unable to mint and redeem TUSD as well as any of our TrueCoin’s including TAUD, TCAD, and TGBP while Prime Trust operations are suspended.”

Read more: Scoop: TrueUSD pauses attestations amid Prime Trust issues

Even though the three stablecoins that haven’t received attestations for five days are less than one percent of the stablecoins under the control of the TrueCoin umbrella, the fact that The Network Firm — an auditor explicitly working with web3 firms and creating realtime attestations for True for months now — has been unable to give even a basic attestation of three out of four of the stablecoins seems to be a concern.

Protos will update this article if anything changes.

Quotes in bold are our emphasis. Got a tip? Send us an email or ProtonMail. For more informed news, follow us on Twitter, Instagram, Bluesky, and Google News, or subscribe to our YouTube channel.

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A number of stablecoins associated with Justin Sun — most notably TUSD, a US dollar derivative owned and operated by US-based tech company Archblock and Asian consortium Techteryx — have been struggling amid rumors that Prime Trust, one of its only US dollar on- and off-ramps, had paused minting and redemptions.

BitGo, a cryptocurrency security and trust company, is rumored to be in talks to purchase the company.

TUSD admitted to an issue on June 9, saying, “…mints via Prime Trust are paused.” It added that “TUSD minting and redemption services remain unaffected” and that its “partnerships with other banking institutions remain intact.”

This would almost certainly be a reference to the other trust previously holding funds for TUSD, a Hong Kong-based entity called First Digital.

However, Chinese and US users alike were complaining on Telegram and Twitter, stating that redemptions were taking longer than expected.

Read more: Justin Sun’s stablecoin TUSD curiously grows amid market meltdown

Attestations and obfuscation

While TrueUSD was once included as a customer for Armanino’s “real-time attestations,” it was dropped when the auditing firm decided to stop offering attestations to cryptocurrency companies (perhaps because it had previously audited FTX US).

TUSD has since begun working with The Network Firm — a new auditing company composed of many of the same auditors from Armanino’s now-defunct crypto wing — and is still provided with “real-time attestations.”

Until recently, the attestations included the locations where assets were being kept, including but not limited to Prime Trust and First Digital. More contemporaneous attestations have removed all company names associated with the custody of assets.

Meanwhile, ownership over the stablecoin remains confused. Archblock states that it doesn’t “control the funds, but… manages the banking and trust relations for the user on their behalf. The private keys have been handed over to the Techteryx engineering team.” Archblock last raised $12.5 million in 2021 from SBF’s Alameda Research, Ari Paul’s BlockTower, and a16z.

However, all attestations have been signed off by executives from Techteryx (Steve Liu and Jennifer Jiang), suggesting that they’re the ones looking over and submitting financial documents to the auditing firms.

Read more: Crypto market maker Justin Sun ‘accidentally’ takes advantage of SUI promo

BitGo loses lawsuit, TUSD peg remains

In an odd development in the acquisition of Prime Trust, BitGo lost a major lawsuit against Galaxy Digital. The company was suing Galaxy for backing out of a $1.2 billion acquisition agreement in 2021. Galaxy Digital countered that BitGo had never provided proper financial disclosures and documents. If Galaxy Digital’s claims are true, a lack of financial disclosures and documents could provide an obstacle to BitGo acquiring Prime Trust.

Either way, it appears as though TUSD has lost Prime Trust as a partner and is relying almost entirely on First Digital. This hasn’t dramatically hurt the TUSD peg, which has almost reached $1. The coin has experienced previous price volatility, mainly between 2018 and 2020, falling as low as $0.94. More troubling is the complete stall in market cap since March of this year, signaling no major alterations in mints or redemptions for nearly three months.

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The market cap of TrueUSD has more than doubled in the last month to over $2 billion. TrustToken Incorporated, one of the companies behind the True family of tokens advertises them as “maximally transparent,” but the reality is somewhat different.

Who owns TrueUSD?

TrueUSD (TUSD) was launched in 2018 by California-based TrustToken Incorporated. It has always been a minority stablecoin, lagging behind market leaders like Tether and Circle, first reaching a market cap of $1 billion in early May 2021 when it nearly tripled in less than a week.

Several months earlier, in December 2020, TrustToken announced that it would be switching to a new ownership structure. Further details were given on the MakerDAO governance forum which described how the ownership structure was changing.

It outlined how the business was being acquired by Techteryx, an Asia-based conglomerate that worked in “traditional real estate, entertainment, environmental, and information technology industries.” The post also maintained that Jennifer Jiang, the lead investor for the entity that Techteryx created to acquire TUSD, was an experienced investor who was “deeply connected.”

Despite this new ownership structure, TrustToken maintained that Techteryx would not control the funds or the private keys.

The firm also made sure to emphasize that its ownership was not tied to Justin Sun. A point it felt the need to emphasize due to the fact that Sun was using an Asia-based conglomerate to make other purchases, including BitTorrent.

Sun used to be listed as the ‘Asia Market Advisor’ on TrueUSD’s website but has since been removed.

Things became even more complicated in September 2022 when TrustToken Inc. announced that it was re-branding as Archblock.

Archblock has clarified that it is a separate entity to Techteryx, and that Sun does not own a stake in Archblock. Archblock also said that there is no current business relationship with Justin Sun, noting he is no longer its ‘Asia Market Advisor.’ Archblock also said that it is not in a position to describe what other businesses Jennifer Jiang is a part of.

What other True products exist?

Besides the dollar-pegged TrueUSD, TrueToken also offers several other stablecoins, including:

• TrueAUD, pegged to the Australian Dollar,
• TrueHKD, pegged to the Hong Kong dollar,
• TrueCAD, pegged to the Canadian dollar,
• TrueGBP, pegged to the British pound.

There is also an uncollateralized DeFi lending platform called TrueFi, and a multi-stablecoin pool called TrueFx.

Nominally at least, control of TrueFi has been handed over to a DAO that will run it, though the TrueFi Foundation, based out of the British Virgin Islands, still helps oversee it. The governance of the DAO is managed by the TRU token.

Alameda Research was a lead investor in TrustToken and the TRU token.

Notably, TrueFi has seen the pace of loans it has extended fall precipitously after several key borrowers, including Alameda Research, defaulted. Alameda defaulted on approximately $7.3 million in USDC loans that were extended by TrueFi and managed by the TrueTrading team.

According to a post in the TrueFi forum, TrueTrading is a wholly-owned subsidiary of Archblock.

TrueFX is also described on the TrustToken homepage as ‘a stablecoin basket built on all five TrueCurrencies.’ Protos was unable to find any more details about a stablecoin basket but an earlier Medium post from TrueFi did describe TrueFX as the LP tokens for a Balancer pool containing the five stablecoins. There is currently only $13.7k in liquidity in this pool.

Archblock has clarified that, “TrueFX is the old name of all stablecoins we operate. Going forward, we will call this TrueCoin to avoid confusion” and that “the Balancer pool is a proof of concept only.”

Read more: Justin Sun’s stablecoin TUSD curiously grows amid market meltdown

Attestations and reserves

The True family of stablecoins is marketed as ‘maximally transparent’ and it’s claimed that they are ‘independently attested’ with ‘live updated proof of reserves.’ This is offered through the TrustExplorer product which is meant to give users a view into the current status of the reserves and the tokens on the blockchain. It also allows users to easily retrieve the most recent independent attestation.

However, the attestations seem to have stopped. The last one available for TrueUSD is from December 31, 2022, and TrueAUD, TrueCAD, and TrueGBP all have their most recent attestations dated January 31, 2023.

TrueHKD doesn’t have any attestations available, nor is it available in the TrustExplorer, which is meant to provide real-time insight.

Archblock claimed to Protos that it is possible to find the attestation for TrueHKD using “an embedded widget on the archblock.com/truecoin sites.” A review of that site by Protos was unable to locate a TrueHKD attestation and we have reached out to Archblock for further clarification.

Archblock later said: “We will be updating the website with regard to TrueHKD to state that due to low volumes, limited user base, and use cases for THKD, we decided to no longer support live attestations. Should anyone have any questions, they may reach out to support@truecoin.com.”

These attestations were being prepared by Armamino LLP. The company also audited FTX US, which it was reported has left the cryptocurrency ecosystem.

The TrustExplorer website says: “A new CPA firm dedicated to serving the digital assets industry will sign off on the real-time assurance reports later in Q1 2023.” This leaves TrustToken/Archblock a few days to finish its next attestation.

Archblock states that “After Armanino LLP decided to stop serving companies working in crypto, we engaged with a new firm that expects to go live later this week with the same attestation frequencies.”

TrustExplorer used to show which banking partners were holding the reserves for the various tokens but this feature looks to have been disabled shortly after crypto research firm ChainArgos pointed out that it showed funds being moved from Signature Bank to other firms. Archblock says that this change in behavior is related to the “transition for the attestation reinstatement with the new auditor.”

Interestingly, the amount noted by ChainArgos seems to be the same amount that Bloomberg reported was moved to Capital Union in the Bahamas. TrueUSD’s market cap has increased by a similar amount over the last couple weeks.

On-chain behavior

ChainArgos has noted that TrueUSD is burned and issued far more frequently than competing stablecoins like USDT and USDC.

The researcher has also highlighted how the two largest minters for TrueUSD were Justin Sun and Alameda Research.

There is strangeness in the on-chain behavior of other True stablecoins. Blockchain analysis conducted by Protos noted that FTX was one of the largest holders of TrueAUD, despite not seeming to support the token.

The Finder Earn product, which is currently the subject of a lawsuit by Australian regulators, involved Finder converting customer deposits into TrueAUD and then using them to earn yield.

Read more: Coinbase allegedly offered Circle $3B lifeline during USDC depeg

It’s unclear how Finder would earn that yield, but Finder’s directors had previously sold their over-the-counter (OTC) trading desk to Alameda Research and it was used to bank FTX.

Finder was not the only Australian firm to use TrueAUD as part of a yield product. Swyftx had a very similar product which has also since been discontinued. The Australian Financial Review reported that Swyftx purchases almost all of the cryptocurrency for its customers through Binance, though it has claimed to be distinct from the exchange.

Both Celsius and Crypto.com seem to have previously offered yield on TrueAUD.

What is TrueUSD up to?

Figuring out the true ownership of these interconnected entities isn’t easy. TrueUSD specifically exhibits a pattern of sudden and massive increases in market cap along with unusually active burning and minting.

At least one of the stablecoins offered by this team appears to have no attestation and the rest have increasingly stale attestations. Meanwhile, the team was at one point advised by Justin Sun, a marketer who has stolen the design of a failed stablecoin for his own.

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Edit 16:20 UTC, Mar 22: Added comments from Archblock clarifying the relationship between Justin Sun and Archblock and noted that Archblock is a distinct entity from Techteryx. Also provided additional clarification on the purpose of TrueFX and added comment from Archblock confirming a new auditing partner. Further noted that Archblock claims that the TrueHKD attestations are available, though Protos has been unable to locate them.

Edit 16:45 UTC, Mar 22: Clarified that Archblock will not be including TrueHKD in the live attestations and is in the process of updating its website. Removed an incorrect note about the time that the Terra Luna system collapsed.

The post What’s up with TrueUSD and the rest of TrustToken’s stablecoins? appeared first on Protos.

Almost all stablecoins have seen their market caps dramatically reduced since the collapse of the Do Kwon-founded Ponzi scheme Terra/Luna in May and June of last year. Attestations are also becoming difficult to come by as auditors abandon the crypto industry en masse.

BUSD, or Binance USD, a stablecoin issued by Paxos, has been hit particularly hard — its market cap has crumbled from $22 billion to $10 billion over the last three months. What’s peculiar, however, is the upward momentum of the Justin Sun-controlled stablecoin TUSD which has seen its market cap balloon from $750 million in December to nearly $1.2 billion today. This is despite it no longer being able to get regular attestations from Armanino, its auditor.

When it comes to failing stablecoins, Frax and BUSD have been leading the charge, shedding 65% and 60% of their market caps respectively. Even the largest issuers, such as Tether and USDC (the stablecoin operated by Circle) have seen their market caps fall 15-25% since peaking in 2022.

Only Sun-owned and controlled stablecoins, such as USDJ and USDD, have seen their market caps remain untouched, with seemingly no redemptions happening at all.

The total market cap for stablecoins has gone from about $200 billion in May of 2022 to $130 billion today, a 35% decrease.

No audit no cry

Meanwhile, Armanino, the auditor of choice for FTX and a slew of other crypto companies, has failed to provide an attestation for TUSD since December of 2022. Real-time reserve attestations aren’t being Armanino-branded, either. In an odd twist, however, up-to-date attestations for TAUD, TCAD, and TGBP are available and certified by Armanino.

The stablecoin issuer was purchased by an Asian conglomerate branded as Techteryx, supposedly tied to Justin Sun, in April of 2021.

Read more: Justin Sun strengthens ties to Tether and Hong Kong

TrustToken has removed Armanino branding from its website. Armanino announced that it would no longer be offering services to crypto companies after the fallout from the collapse of FTX, but this hasn’t stopped the team formerly in charge of the firm’s cryptocurrency arm from going off and starting their own auditing firm.

This new company will be focused on cryptocurrency companies (according to CoinDesk reporting). We wish them luck taking on TUSD and the rest of Justin Sun’s stablecoins.

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