People deposit BTC and ETH and other cryptos, and the smart contract uses the conversion rate between these and USD in order to gauge its reserve in USD.
Sounds risky but definitely sounds useful and like a step in the right direction!
You gain the risk of insolvency, but you lose the risk of corruption.
The first page clearly says "A decentralized cryptocurrency pegged the U.S. dollar". This message is a scam, plain scam, you don't need to bring the SEC to realized that. After reviewing all this thread I flagged the top comment.
I think it's a fascinating project.
That the SEC thinks risk of insolvency is more of a problem than risk of corruption is irrelevant.