Justin Sun Warns FDUSD Issuer Is ‘Insolvent’—Users at Risk!
Justin Sun claims FDUSD issuer FDT is insolvent, urging users to withdraw assets. FDT denies the allegations, calling them false.
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TRON founder Justin Sun has alleged that First Digital Trust (FDT), the issuer of the FDUSD stablecoin, is “effectively insolvent” and unable to fulfill redemption requests. Sun urged users to withdraw their assets from any projects linked to FDT to avoid potential financial losses.
Sun’s statement follows reports that he intervened to support TrueUSD (TUSD) after it was revealed that $456 million of its reserves were illiquid. First Digital Trust has been managing TUSD’s reserves since Techteryx acquired the stablecoin from TrueCoin in 2020.
Allegations of Mismanaged TUSD Reserves
According to court filings, Techteryx had instructed FDT to invest TUSD reserves into the Aria Commodity Finance Fund (Aria CFF). However, instead of following these instructions, $456 million was allegedly diverted to Aria Commodities DMCC, an unauthorized entity based in Dubai.
Between 2022 and 2023, Techteryx attempted to recover the funds but reportedly received little or nothing in return. As a result, Techteryx took full control of TUSD’s operations by mid-2023 and isolated 400 million TUSD tokens to ensure redemptions could continue.
FDT, on the other hand, stated that it had acted on Techteryx’s instructions and was not responsible for evaluating investment decisions. The company also cited anti-money laundering (AML) and know-your-customer (KYC) concerns as reasons for delays in releasing funds.
FDT Denies Insolvency Claims
In response to Sun’s statement, First Digital Trust strongly denied the accusations, calling them “completely false.” The company asserted that Sun was attempting to discredit competitors in the stablecoin market.
FDT emphasized that the dispute only involves TUSD and does not affect FDUSD, which it issues separately. The company assured users that FDUSD is fully backed by U.S. Treasury Bills and remains secure.
Additionally, FDT threatened legal action against Sun, stating that it would take necessary steps to defend its reputation.
FDUSD Price Drop Amid Market Reactions
Following the controversy, FDUSD’s price fell as low as $0.8811, deviating significantly from the $1 peg it had been, usually. However, the stablecoin is recovering well as it comes at a price of $0.9921
The fear among the crypto community is real, as market players use that period to keep an eagle eye on the updates. Regulators should do something, said Sun, who has called for shortcomings in the Hong Kong scheme of granting licenses to trust companies.
The conflict between Sun and FDT persists, with each party holding to their stance. Users and investors should remain informed as developments occur.
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