Justin Sun and FDT clash over misused TrueUSD funds, Sun live-streams to expose a major international financial fraud in Hong Kong.

Justin Sun warns about financial risks, urging action from regulators, supporting the need for stronger rules.

Tron founder Justin Sun has become involved in a public dispute with First Digital Trust (FDT), a Hong Kong-based financial firm, over misused TrueUSD (TUSD) funds.

The standoff began after Sun stepped in with emergency funding for TrueUSD to prevent its collapse. The stablecoin faced a $456 million liquidity crisis as a result of illiquid investments, rendering the token vulnerable to a large-scale redemption that could have disastrous consequences.

Although Sun maintains he was only an advisor and not directly involved with TrueUSD, he provided crucial financial support to keep the token afloat.

However, his involvement sparked a heated exchange with FDT, which was appointed as a receiver for TrueUSD by Hong Kong's courts.

In a statement live-streamed on X, Sun accused bad actors of mishandling Techteryx’s TUSD reserves, forcing him to intervene quietly.

Taking his allegations public, Sun claimed to be exposing a major international financial fraud that spanned both traditional finance and Web3 platforms. He also criticized Hong Kong’s financial regulations, which he argued had allowed the alleged fraud to occur with impunity.

"This situation poses a major risk to financial integrity and investors need to be aware," he stated. "I found it hard to believe the scale of fraud orchestrated by a long list of licensed intermediaries in Hong Kong is true."

He urged investors to avoid Hong Kong-based trust companies for now and called on regulators to take stronger action.

Hong Kong lawmaker Johnny Ng, a key supporter of Web3 development in the city, backed Sun’s concerns, adding that there have been other cases of financial fraud in the region. He highlighted the need for better oversight of the industry to protect users and maintain stability in the financial system.

"Those who are familiar with the crypto space in Hong Kong know that this is not an isolated incident," Ng said. "There have been other cases of financial fraud in recent years, and the authorities need to do more to protect users and maintain stability in the financial system."

In response to Sun’s accusations, FDT held its own press conference to deny any wrongdoing and announce plans to sue the Tron founder over false claims.

FDT CEO Vincent Chok said that Sun had not provided any evidence to support his allegations, which he considered "malicious and libellous."

"We have performed our fiduciary duties in accordance with the directions of the court and acted in the best interest of the beneficiaries of the trust," Chok said.

He added that all transactions with Techteryx were carried out with the approval of the company's liquidator and bank, and that FDT undergoes regular third-party audits.

However, Chok admitted that he was unaware of the family connection between Aria CFF and Aria DMCC, the entities that were holding TrueUSD's reserves.

"I was not aware of the family connection between the two companies, but I can confirm that all transactions were carried out with the approval of the liquidator and the bank."

Chok also addressed concerns about delays in recovering funds from Techteryx. He said that the issues stemmed from KYC (Know Your Customer) and AML (Anti-Money Laundering) compliance requirements related to Techteryx's ownership structure, which was being wound down.

"We are still working on recovering the funds, and we are in the process of distributing them to the TrueUSD token holders," Chok said. "I want to assure everyone that the TUSD token remains solvent and that all token holders will be paid in full."

He added that FDT had no trouble processing FDUSD redemptions, contrary to Sun's claims.

In a statement shared on X, FDT said that it was planning to sue Sun and share on-chain data showing that redemptions were still being processed.

"We are deeply disappointed by Justin Sun's false and defamatory statements about First Digital Trust," the company said. "We have no choice but to pursue legal action to clear our name and recover damages."

The TrueUSD crisis has escalated into a high-stakes showdown between one of crypto's most influential figures and a major financial institution. The outcome will determine whether Sun's fraud allegations hold up - or if FDT can prove its compliance and clear its name.