- TRON founder Justin Sun accused First Digital Trust (FDT), the issuer of FDUSD, of being insolvent and urged users to secure their assets, while FDT denied the claims, calling them a smear campaign.
- The dispute, linked to mismanaged TUSD reserves, caused FDUSD to briefly depeg before recovering.
The cryptocurrency space was rocked this week by bold accusations from TRON founder Justin Sun, who claimed that First Digital Trust (FDT), the issuer of the FDUSD stablecoin, is “effectively insolvent.” Sun warned users to secure their assets from any projects linked to FDT, citing serious concerns about the company’s ability to fulfill redemption requests.
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The Controversy Behind FDUSD and TUSD
Sun’s comments come amid growing scrutiny of First Digital Trust’s handling of TrueUSD (TUSD) reserves. FDT, which manages TUSD’s reserves, has been accused of misdirecting $456 million meant for the Aria Commodity Finance Fund (Aria CFF) to an unauthorized entity, Aria Commodities DMCC, based in Dubai.
Court documents indicate that between mid-2022 and early 2023, Techteryx, the entity behind TUSD, struggled to recover its investment in Aria CFF. The situation escalated to the point where Techteryx took full operational control of TUSD in July 2023. In response to the crisis, the company isolated 400 million TUSD tokens to maintain redemptions.
FDT, however, insists that it merely followed Techteryx’s instructions when investing TUSD reserves and that any delays in fund redemption were due to anti-money laundering (AML) and know-your-customer (KYC) concerns.
Sun vs. First Digital Trust
Justin Sun, an influential figure in the crypto world, was quick to call out FDT, labeling it insolvent and urging investors to move their assets. He also highlighted weaknesses in Hong Kong’s licensing framework for financial trusts, pushing for stricter oversight to prevent further financial mishaps.
First Digital Trust strongly denied Sun’s allegations, dismissing them as a smear campaign against its business. The company clarified that the controversy pertains only to TUSD and has no connection to FDUSD, its stablecoin. FDT reassured investors that FDUSD remains fully backed by U.S. Treasury Bills and that redemption services continue as normal.
FDT further threatened legal action against Sun to safeguard its reputation. Meanwhile, FDUSD briefly de-pegged, dropping to $0.8811 before recovering to $0.9921 at press time.
The Bigger Picture
This latest dispute highlights the ongoing risks in the stablecoin sector, where transparency and trust are paramount. Investors are now left to decide whether to heed Sun’s warning or trust First Digital Trust’s assurances. Regardless of the outcome, the controversy is sure to fuel calls for tighter regulation in the digital asset industry.
