Justin Sun, the founder of Tron, issued a warning today about First Digital Trust (FDT), claiming it is insolvent and cannot meet client redemptions.
He urged users to secure their assets and called for swift action from Hong Kong regulators to prevent further issues. Sun’s post highlighted concerns about Hong Kong’s reputation as a financial center, citing weak oversight in trust licensing and risk management.
This warning followed recent court filings revealing that Sun had previously provided emergency liquidity to Techteryx’s TrueUSD (TUSD) stablecoin. This intervention occurred after $456 million in reserves became trapped in illiquid investments.
The reserves had been improperly redirected from their intended destination to a Dubai-based entity without authorization. FDT was responsible for managing TUSD’s reserves and allegedly facilitated this unauthorized transfer.
Plaintiffs in the case accused FDT of misappropriation and misrepresentation. However, FDT’s CEO, Vincent Chok, denied wrongdoing, claiming the firm acted on instructions from Techteryx and raised concerns about KYC issues related to the stablecoin issuer.
Following Sun’s warning, the FDUSD stablecoin, issued by First Digital, fell 5% from its peg, resulting in a loss of about $130 million in market capitalization. Although FDUSD later recovered to $0.98, it remained below its $1 peg, raising concerns about its stability.
In response to Sun’s claims, First Digital Trust denied being insolvent, stating that the dispute is related to TUSD, not FDUSD. They asserted that FDUSD is fully solvent and backed 1:1 by US Treasury Bills, with reserves clearly listed in attestation reports. A spokesperson dismissed Sun’s post as a smear campaign against a competitor and announced plans for legal action to protect their reputation.
