Hong Kong-based First Digital Trust (FDT) is under fire after Tron founder Justin Sun issued a stark warning about its solvency. The warning triggered a sharp decline in the price of FDUSD, a stablecoin issued by First Digital, which dropped as much as 9%, erasing $130 million from its market cap.
What’s Happening?
Justin Sun took to social media, urging users to pull their funds from First Digital Trust, claiming the firm is effectively insolvent and unable to process redemptions. His comments came after reports surfaced that Techteryx, the company behind the TrueUSD (TUSD) stablecoin, had filed a lawsuit against First Digital CEO Vincent Chok.
At the heart of the issue is nearly $456 million in missing TUSD reserves, which were allegedly redirected into risky, illiquid investments instead of being safely held for stablecoin backing.
First Digital Fires Back
First Digital quickly denied Sun’s claims, calling them a “smear campaign” and insisting that FDUSD is fully backed by U.S. Treasury Bills. They emphasized that the dispute is with TUSD and not FDUSD.
Why Does This Matter?
FDUSD plays a major role in the crypto ecosystem, particularly on Binance, which holds about $2.2 billion worth of the stablecoin. Any disruption could have serious consequences for the exchange and the broader market. As Coinbase director Conor Grogan pointed out, BTC/FDUSD is one of Binance’s most traded pairs, meaning this instability could ripple across the industry.
The Bigger Scandal: Missing Millions
Court filings reveal that Techteryx’s funds were funneled into an unauthorized entity in Dubai instead of the intended investment fund. These funds were then locked in illiquid projects like mining operations and renewable energy ventures, making them impossible to access when Techteryx needed to redeem them.
To make matters worse, First Digital’s CEO is accused of directing $15.5 million in secret commissions and approving $15 million in unauthorized loans, which Techteryx describes as outright money laundering.
Regulators on High Alert
Justin Sun is now calling for regulators and law enforcement to step in, warning that Hong Kong’s reputation as a global financial hub is on the line.
With Sun promising to reveal more details in an upcoming press conference, the crypto world is bracing for further fallout.
Will FDUSD survive this crisis? Or is this the beginning of another major stablecoin collapse? Stay tuned.
