- The FDUSD stablecoin experienced a 5% drop in value after Justin Sun, founder of TRON, claimed that its issuer, First Digital Trust, is insolvent.
- Sun urged investors to protect their assets and emphasized the necessity for government action to avert additional losses.
- First Digital refuted these claims, labeling them as a typical smear campaign by Sun.
In a post on X, Justin Sun accused First Digital Trust (FDT), which issues the FDUSD stablecoin, of being unable to meet its obligations, resulting in a temporary breach of the stablecoin’s US Dollar (USD) peg.
Justin Sun alleges insolvency of First Digital Trust
Sun declared that First Digital Trust (FDT) is insolvent and unable to fulfill user redemptions.
He advised investors to withdraw their assets from FDT, pointing out vulnerabilities in Hong Kong’s trust licensing and flaws in its internal financial risk management. He also called for police intervention to mitigate potential damage.
“I urge authorities and law enforcement to act quickly to tackle these issues and avert further significant losses,” Sun stated in his X post.
In the wake of this news, FDUSD saw a 5% decline from its USD peg, though it swiftly rebounded.
FDT rejected Sun’s insolvency assertions, claiming that their disputes do not pertain to FDUSD and asserting that Sun’s statements are merely an attempt to undermine a rival.
The firm also emphasized that FDUSD is fully collateralized by US Treasury bills, and its reserves have been verified in their attestation report.
Justin Sun is a prominent supporter of the USDD and USDD 2.0 stablecoins, issued by TRON DAO, the governance body of the blockchain he established.
Sun’s conflict with FDT arose after reports indicated that he intervened to support Techteryx’s TrueUSD stablecoin, which faced liquidity issues with nearly half a billion dollars of its reserves, according to documents from a Hong Kong court.
These documents reveal that Techteryx obtained the TrueUSD (TUSD) stablecoin from TrueCoin in December 2020 and entrusted its reserves to First Digital Trust for management.