Justin Sun Sparks Controversy Over FDUSD Insolvency Claims

A stablecoin lost its peg to the US dollar on Wednesday morning, following allegations that the company behind it, based in Hong Kong, was facing bankruptcy.

Tron founder and well-known crypto figure Justin Sun took to social media platform X, urging his followers to act swiftly to protect their investments in FDUSD, a stablecoin operated by First Digital Trust (FDT). Sun stressed the need for regulatory intervention to curb potential losses and safeguard Hong Kong’s standing as a global financial hub.

According to Sun, FDT is essentially insolvent and incapable of redeeming client funds. He advised users to promptly secure their assets, pointing out what he described as serious flaws within Hong Kong’s trust licensing and financial risk management systems.

Sun called on authorities to intervene rapidly to prevent further damage, emphasizing that incidents like these could tarnish Hong Kong’s reputation as a leading financial center.

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In contrast, First Digital Trust dismissed Sun’s accusations as entirely unfounded and announced plans to take legal action to defend its name. The company clarified that the dispute involved TUSD rather than FDUSD and insisted that its financial position remained solid. FDT asserted that all reserves backing FDUSD were safe, secured with US Treasury Bills, and thoroughly documented in its attestation report.

FDT claimed that Sun’s statements were part of a calculated smear campaign intended to harm a business rival. The company expressed frustration that it hadn’t been given a fair chance to respond to the allegations, adding that it would take legal steps to protect its reputation from what it described as an orchestrated social media attack.

Alexander Stefanov