A Prominent Stablecoin Depegged from the US Dollar Wednesday Morning After It Was Alleged That Its Hong Kong-Based Issuer Was Bankrupt

In a new thread on the social media platform X, crypto billionaire and Tron (TRX) founder Justin Sun urged his followers to “take immediate action” to protect any assets they held in FDUSD

Prominent stablecoin FDUSD, managed by First Digital Trust (FDT), has come under scrutiny following allegations by Tron founder Justin Sun that the Hong Kong-based issuer has become bankrupt.

In a critical thread on X (formerly Twitter), Sun, also an ambassador for the World Food Programme, expressed serious concern over the situation.

“First Digital Trust (FDT) is effectively insolvent and unable to fulfill client fund redempptions. I strongly recommend that users take immediate action to secure any assets they hold in FDUSD.

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.”

First Digital Trust (FDT) is effectively insolvent and unable to fulfill client fund redemptions. I strongly recommend that users take immediate action to secure any assets they hold in FDUSD.

There are significant loopholes in both the trust licensing process in Hong Kong and the internal…

— Justin Sun (@JustinSun_) August 16, 2023

Earlier in the day, FDUSD suffered a de pegging from the US dollar after crypto billionaire Justin Sun alleged that Hong Kong-based trust company First Digital Trust (FDT) has become bankrupt and cannot redeem client funds.

In response, the FDUSD has denied Sun’s claims and will pursue legal action to defend its reputation.

“The recent allegations by Justin Sun against First Digital Trust are completely false.

This dispute is with TUSD and not with FDUSD. First Digital is completely solvent.

Every dollar backing FDUSD is completely, secure, safe and accounted for with US-backed T-Bills. The exact ISIN numbers of all of the reserves of FDUSD are set out in our attestation report and clearly accounted for.

This is a typical Justin Sun smear campaign to try to attack a competitor to his business. As we told the reporter at CoinDesk, we have not yet had the opportunity to defend ourselves and instead of letting the TUSD matter be dealt with in court, Justin has instead resorted to a coordinated social media effort to try to damage FDUSD as a business competitor.

FDT will pursue legal action to protect its rights and reputation.”

The incident has raised concerns over the stability of the stablecoin ecosystem and the speed at which regulators can intervene to mitigate such crises.

It also serves as a stark reminder of the importance of performing due diligence before investing in any cryptocurrency or defi protocol.

Prominent stablecoin FDUSD, managed by First Digital Trust (FDT), suffered a de pegging from the US dollar on Wednesday morning after it was alleged that its Hong Kong-based issuer has become bankrupt and cannot redeem client funds.

In a new thread on the social media platform X, crypto billionaire and Tron (TRX) founder Justin Sun urged his followers to “take immediate action” to protect any assets they held in FDUSD.

Sun also called for regulators to step in and take action to prevent further losses and save Hong Kong’s reputation as a financial power.

“First Digital Trust (FDT) is effectively insolvent and unable to fulfill client fund redemptions. I strongly recommend that users take immediate action to secure any assets they hold in FDUSD.

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.”

FDUSD dipped to about $0.949 earlier in the day but has since recovered and is trading for $0.982 at time of writing, a decrease of 1.27% during the last 24 hours.

In response, the FDUSD has denied Sun’s claims and will pursue legal action to defend its reputation.

“The recent allegations by Justin Sun against First Digital Trust are completely false.

This dispute is with TUSD and not with FDUSD. First Digital is completely solvent.

Every dollar backing FDUSD is completely, secure, safe and accounted for with US-backed T-Bills. The exact ISIN numbers of all of the reserves of FDUSD are set out in our attestation report and clearly accounted for.

This is a typical Justin Sun smear campaign to try to attack a competitor to his business. As we told the reporter at CoinDesk, we have not yet had the opportunity to defend ourselves and instead of letting the TUSD matter be dealt with in court, Justin has instead resorted to a coordinated social media effort to try to damage FDUSD as a business competitor.

FDT will pursue legal action to protect its rights and reputation.”

Featured Image: Shutterstock