Tron founder Justin Sun has found himself embroiled in yet another financial dispute, this time accusing Hong Kong-based financial firm First Digital Trust (FDT) of misappropriating nearly $500 million in client reserves. Sun, who previously played a crucial role in providing emergency liquidity for TrueUSD (TUSD) back in 2023, has taken his allegations public by reporting the case to Hong Kong authorities, claiming that FDT is now “effectively insolvent.”
The latest revelations have sent shockwaves through the market, with the FDUSD stablecoin, issued by a separate division of First Digital, experiencing a significant devaluation. The token saw a sharp decline of up to 9%, resulting in approximately $130 million being wiped out from its market capitalization before a partial recovery.
Despite First Digital’s strong denial of the accusations and assurance that FDUSD is fully backed by U.S. Treasuries, doubts and skepticism still linger. With Binance holding over $2.2 billion in FDUSD, concerns about the broader impact of these allegations on the crypto ecosystem continue to grow.
Sun has called for immediate regulatory intervention and has promised to disclose further details at an upcoming press conference.
The heart of the dispute lies in a lawsuit filed by TUSD issuer Techteryx against FDT, revealing a $456 million shortfall in reserves supposedly backing the stablecoin. Court filings indicate that between 2023 and early 2024, funds meant to secure TUSD were redirected into unauthorized and highly illiquid investments through Dubai-based Aria Commodities DMCC, a company engaged in risky ventures such as mining and renewable energy projects.
Techteryx claims that the investment strategy deviated from the agreed-upon plan, which was to deposit the funds into the regulated Cayman-registered Aria Commodity Finance Fund (CFF). Instead, FDT allegedly sent the money to Aria DMCC without Techteryx’s knowledge or approval, leading to what Techteryx describes as “blatant misappropriation and money laundering.”
Additionally, the lawsuit highlights an extra $15.5 million in undisclosed commissions directed to an entity named “Glass Door,” along with another $15 million in loans falsely classified as investments. First Digital CEO Vincent Chok has refuted these allegations, stating that the firm was acting under Techteryx’s instructions and that the delays in fund retrieval stem from concerns about the stablecoin issuer’s ownership and compliance profile.
Sun, who has distanced himself from TUSD despite his previous financial interventions, has framed the scandal as a test for Hong Kong’s credibility as a global financial hub. He has urged authorities to take swift action against what he deems a severe case of financial fraud.
The market repercussions of Sun’s allegations against First Digital Trust have been significant, with FDUSD experiencing a notable de-pegging from its $1 price anchor. The token plummeted to $0.87 against Tether’s USDT and as low as $0.76 against USDC on Binance before a partial recovery to the $0.97 – $0.99 range.
In response, FDT has accused Sun of orchestrating a “smear campaign” to undermine a competitor in the stablecoin space and has vowed to pursue legal action against him for reputational damage, maintaining that the situation surrounding TUSD has no impact on FDUSD.
The unfolding drama surrounding Justin Sun, First Digital Trust, and Techteryx underscores the challenges and uncertainties facing the crypto industry, highlighting the importance of transparency, compliance, and regulatory oversight in the evolving financial landscape.