Justin Sun Accuses First Digital Trust (FDT) of Insolvency and Mismanagement of Funds

Justin Sun, the founder of TRON, accused First Digital Trust (FDT), the issuer of FDUSD, of being insolvent and unable to back up its token.

Justin Sun, the founder of TRON, has accused First Digital Trust (FDT), the issuer of FDUSD, of being insolvent and unable to back up its token. In a statement released on Monday, Sun said that he had been "informed by multiple sources" that FDT was in "dire straits" and that its actions had "devastating consequences for the crypto ecosystem and Hong Kong's financial reputation."

Sun appealed to FDT holders to withdraw their funds immediately. He also pointed out the inconsistencies with the Hong Kong licensing process and risk management, and asked for more accountability from authorities. Finally, he requested that Hong Kong law enforcement step in and prevent further losses.

“First Digital Trust (FDT) is effectively insolvent and unable to fulfill client fund redemptions,” said Justin. “I strongly recommend that users take immediate action to secure their assets. There are significant loopholes in both the trust licensing process in Hong Kong and the internal risk management of its financial system. I urge regulators and law enforcement to take swift action to address these issues and prevent further major losses. Hong Kong's reputation as a global financial center is at stake, and similar financial fraud incidents must never happen again.”

FDT has responded to these accusations by saying that FDUSD is unrelated to the dispute and that there is no insolvency issue. They suggested that Sun was conducting a smear campaign against a business competitor. They also claims that U.S. Treasury bills back their currency.

According to a Sing Tao Daily interview, Sun was completely shocked when he learned about the situation, not knowing how a financial institution could blatantly take someone’s deposits and spend them elsewhere. He also said that his worldview was shattered after discovering the details.

After reading Justin’s statement, Wintermute, a major crypto holder, withdrew around $30 million in FDUSD from Binance. FDUSD may not have been the primary target of Justin’s statement but could be impacted, especially since investors respect Justin and trust what he says. TRON DAO, a governance organisation supported by Justin, is a major backer of USDD and USDD 2.0.

The drama started when Justin bailed out Techteryx’s TrueUSD stablecoin after half a billion reserves became illiquid. In December 2020, Techteryx acquired TrueUSD from TrueCoin and placed its reserves under the management of FDT. TrueCoin continued to run TUSD’s regular operations.

After TrueCoin pulled out of the project in 2023, leaving Techteryx in complete control of the stablecoin, around 400 million TUSD was quarantined even though the token was not backed up with actual value.

However, Vincent Chok, an FDT executive, claims that they conducted an independent evaluation of TUSD under Techteryx’s direction. Matthew Brittain, an Aria Group member, denies any wrongdoing and says that all transactions were transparent.