Justin Sun Alleges First Digital Trust Is Bankrupt After TUSD Stablecoin Bailout
Justin Sun, the founder of Tron, has made a public statement asserting that First Digital Trust, a fiduciary service based in Hong Kong, is insolvent and cannot meet client fund redemptions.
In a post on X, Sun encouraged users to take swift measures to protect their assets and called for regulatory action to curb further financial fraud in the area.
This announcement follows legal documents revealing that approximately $456 million worth of TrueUSD stablecoin reserves have become illiquid due to unauthorized investments.
The issuer of TUSD, Techteryx, had relied on FDT to manage its reserves, but legal filings allege that the company redirected funds into the Aria Commodity Finance Fund, which is registered in the Cayman Islands.
Instead, it is claimed that the funds were improperly sent to a Dubai-based organization, Aria Commodities DMCC. According to CoinDesk, Sun has provided urgent financial assistance to Techteryx.
In summary, the poor management of nearly $456 million in TrueUSD reserves has led to legal repercussions and heightened scrutiny regarding stablecoin regulation.
Sun pointed out that the financial integrity of Hong Kong is jeopardized, remarking, “There are significant loopholes in both the trust licensing process in Hong Kong and the internal risk management of its financial system. I urge regulators and law enforcement to take swift action.”
Legal fallout
The legal documents from Techteryx accuse FDT of misappropriation and fraudulent misrepresentation. Nevertheless, FDT’s CEO, Vincent Chok, has refuted these claims, asserting that the firm acted according to instructions received.
This situation follows a series of broader challenges surrounding TUSD, including the collapse of its former banking partner Prime Trust and a settlement from the SEC in 2024 with TrueCoin and TrustToken regarding misleading investors about the reserves backing the stablecoin.