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Justin Sun: First Digital Trust “Effectively Insolvent” After Stablecoin Price Peg Wobbles

First Digital Trust Denies Justin Sun's Insolvency Allegations, tags it a "Smear Campaign" Amid its $FDUSD Stablecoin Turmoil

Tron founder Justin Sun has come out publicly to declare First Digital Trust (FDT), a Hong Kong-based fiduciary, “effectively insolvent” and unable to fulfill client fund redemptions.

In his X post, Sun urged investors to take immediate action to secure their assets, urging regulators to quickly address the issues to prevent further losses. He also criticized the trust licensing process in the region and called for stricter regulatory oversight to protect Hong Kong.

His statement follows legal filings that expose the mismanagement of nearly $456 million in TrueUSD (TUSD) stablecoin reserves. According to now public Hong Kong court documents, Justin provided emergency funding to stabilize TrueUSD (TUSD) after the stablecoin’s reserves became illiquid.

Justin Sun Reveals FDT Insolvency

Techteryx, the issuer of TrueUSD, had delegated First Digital Trust with the management and handling of its reserves. However, plaintiffs provided court documents that alleged the firm mismanaged the funds, redirecting it into the Aria Commodity Finance Fund (Aria CFF).

The funds were then moved to an unauthorized Dubai-based entity, Aria Commodities DMCC. Aria DMCC invested the funds into projects such as manufacturing plants, mining operations, maritime vessels and port infrastructure considered relatively illiquid.

Additionally, the filings further allege that FDT CEO, Vincent Chok, approved $456 million in unauthorized trade finance loans to Aria DMCC, later mischaracterizing them as legitimate fund investments.

The remittances to Aria DMCC were blatant misappropriation and money-laundering and were made without the knowledge, authorization or approval of the Plaintiff.” the filling reads.

Chok has since denied the allegations of money laundering and misappropriation of funds claiming the company acted in normal stead. The court has not yet examined these claims.

FDUSD Wobbles as First Digital Reacts

First Digital dismissed Sun’s claims of the company being insolvent in an X post.

The recent allegations by Justin Sun against First Digital Trust are completely false. This dispute is with TUSD and not with $FDUSD. First Digital is completely solvent.” the post reads.

Moreover, First Digital vowed to pursue legal action to defend its reputation, calling the allegations a “typical Justin Sun smear campaign” aimed at undermining a competitor.

The drama around TrueUSD trickled down to First Digital’s stablecoin, FUUSD. On Wednesday, the stablecoin’s price peg briefly wobbled, dropping to 0.87 against Tether’s USDT and 0.76 against Circle’s USDC on Binance.

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