Tron founder Justin Sun is once again at the center of a financial controversy, accusing Hong Kong-based First Digital Trust (FDT) of misappropriating nearly $500 million in client reserves. Sun, who provided emergency liquidity for TrueUSD (TUSD) in 2023, has alerted Hong Kong authorities, alleging severe financial misconduct that has rendered FDT “effectively insolvent.” Sun’s claims, made public through a post, come amid a legal dispute between TUSD issuer Techteryx and FDT.
This revelation has already impacted the market. The FDUSD stablecoin, issued by another division of First Digital, saw a temporary drop of up to 9%, erasing around $130 million from its market cap before a slight recovery. First Digital has denied the accusations, asserting that U.S. Treasuries fully back FDUSD. With Binance holding over $2.2 billion in FDUSD, concerns about the wider implications of these allegations persist. Sun has demanded immediate regulatory intervention and plans to disclose more details at a press conference.
The core of the dispute involves a lawsuit filed by Techteryx against FDT, highlighting a $456 million reserve shortfall that was intended to back TUSD. According to court documents, funds meant for the stablecoin’s security were redirected into unauthorized investments. These transactions were allegedly routed through Dubai-based Aria Commodities DMCC, which engages in high-risk activities like mining and renewable energy. Techteryx argues that this deviated from the original plan, which required depositing the funds into the regulated Cayman-registered Aria Commodity Finance Fund (CFF). Instead, FDT allegedly transferred the money to Aria DMCC without Techteryx’s consent.
Adding to the controversy, the lawsuit points to $15.5 million in undisclosed commissions to an entity named “Glass Door” and another $15 million in falsely classified loans. First Digital CEO Vincent Chok has refuted these claims, insisting the firm acted under Techteryx’s instructions and that delays in fund retrieval are due to concerns about the stablecoin issuer’s ownership and compliance profile.
Sun, who has previously distanced himself from TUSD despite his financial interventions, has criticized Hong Kong’s regulatory framework. He urged authorities to act swiftly against what he calls a significant case of financial fraud.
Sun’s allegations have impacted the crypto industry, causing FDUSD to lose its $1 price anchor, plunging to $0.87 against Tether’s USDT and as low as $0.76 against USDC on Binance before partially recovering. Meanwhile, FDT has accused Sun of launching a “smear campaign” to destabilize a competitor in the stablecoin market, pledging legal action against him for reputational damage while insisting that TUSD issues are unrelated to FDUSD.
Twitter:
– Justin Sun: “I met with Hong Kong Legislative Council member Johnny Wu and reported an embezzlement case involving nearly $500 million of client reserve funds by First Digital Trust (FDT).”
– First Digital: “First Digital stands firm: Justin Sun’s baseless accusations won’t distract from Techteryx’s own failures— our stablecoin FDUSD remains fully backed and solvent.”
