Hong Kong lawmaker Johnny Ng has made a firm commitment to take swift action if fraud allegations against First Digital Trust (FDT) are proven to be true. In a recent statement on X, Ng reassured investors that Hong Kong’s regulatory framework for cryptocurrencies remains robust and focused on protecting investors amidst the controversy surrounding FDT.
Ng emphasized that Hong Kong has a strong legal foundation and a supportive environment for international investors and the Web3 industry. He urged investors and tech practitioners not to be deterred by a single incident and to continue investing and developing in Hong Kong with confidence.
The allegations against FDT were brought to light by Tron founder Justin Sun, who claimed that the company had mishandled client funds, potentially putting hundreds of millions of dollars at risk. Sun highlighted concerns about regulatory gaps in Hong Kong’s oversight of trust companies, prompting calls for a review and strengthening of the rules governing these firms.
Ng acknowledged receiving multiple complaints this year related to suspected fraud involving trust company practices, underscoring the need to address potential loopholes that could be exploited by criminals. He emphasized the importance of improving the regulatory framework for trust companies to prevent fraudulent activities.
The dispute between Justin Sun and First Digital Trust escalated when Sun alleged that FDT was on the brink of insolvency due to the misappropriation of client funds, particularly Techteryx’s TrueUSD reserves. Sun criticized Hong Kong’s trust industry for allowing such loopholes to exist, posing risks to the public and tarnishing the city’s reputation as a financial hub.
In response, FDT vehemently denied Sun’s accusations, stating that they were baseless and unrelated to its FDUSD stablecoin. The company clarified that the controversy stemmed from TUSD operations and accused Sun of launching a smear campaign to damage its reputation instead of pursuing legal channels.
FDT affirmed that its stablecoin FDUSD remains fully backed and solvent, and announced plans to seek legal advice to protect its business and reputation from what it deemed as a misleading narrative.
As the controversy unfolds, stakeholders in the cryptocurrency industry are closely monitoring the developments between Justin Sun, First Digital Trust, and the regulatory authorities in Hong Kong. The outcome of this dispute could have significant implications for the trust sector and investor confidence in the city’s crypto ecosystem.