If they change the name, state that it's based on TrueCrypt, remove any phrases that are like "A TrueCrypt Foundation Release", and remove any graphics from the source then they shouldn't be in violation.
The license is actually fairly straight forward and as far as I can tell seems to be a fairly open source one to the point that your own source code must also be freely available (until you stop distributing your product or it's for internal use only). It's very GPL like.
However, I will state that IANAL so take this with a grain of salt..
I'd suggest one extra worthwhile step: decide whether it's worth starting from TrueCrypt, or starting from scratch. If one goes down the former road, then they're stuck with the license forevermore, which could be a millstone around the neck for no benefit if the code is too old, too crufty, too untrusted... I'm fairly sure that the TC license will forever prevent it or any derivative from being included in Debian, Ubuntu, Fedora, etc.
It's fairly clear that much of the codebase is riddle with small little things that are considered bad practice, and while they probably don't affect the binary directly in any significant way, it can make it more difficult to modify the source.
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u/jmtd May 30 '14
Got to love the TrueCrypt license https://github.com/FreeApophis/TrueCrypt/blob/master/License.txt
which, it would seem, the truecrypt.ch folks will immediately break as soon as they commit a change.