FDUSD stablecoin loses up to 13% of its value after public accusation from Justin Sun
The FDUSD stablecoin, issued by Hong Kong-based company First Digital Trust (FDT), experienced a sudden drop of nearly 13% today, losing nearly $200 million in market capitalization within hours before stabilizing just below its peg. The cause of this destabilization was a statement made by Justin Sun, founder of Tron, accusing FDT of insolvency and urging users to immediately withdraw their funds.
An affair of embezzlement and illiquid investments
In the wake of a legal complaint filed by Techteryx, the issuer of the competing stablecoin TrueUSD (TUSD), against FDT CEO Vincent Chok, documents filed in court reveal that nearly half a billion dollars, intended to back TUSD reserves, were diverted to illiquid high-risk investments, compromising the asset’s liquidity.
Funds transferred outside of authorized framework
Judicial revelations show that Techteryx entrusted First Digital with the fiduciary management of its reserves after acquiring TrueUSD in 2020. A significant portion of these funds was directed to a registered investment fund in the Cayman Islands, the Aria Commodity Finance Fund. However, the money was allegedly transferred to a separate unauthorized entity, Aria Commodities DMCC, based in Dubai.
These funds were then invested in illiquid global projects such as mining, renewable energy, and other long-term activities that are incompatible with the nature of a stablecoin meant to ensure constant liquidity. When Techteryx attempted to retrieve its investments between 2022 and 2023, Aria CFF halted repayments. Justin Sun had to intervene by providing an emergency credit line to prevent an immediate crisis.
Suspicions of hidden commissions and money laundering
The case goes beyond improper fund allocation. Techteryx also accuses Vincent Chok of directing over $15 million of hidden commissions to an entity called ‘Glass Door’ and orchestrating unauthorized loans to Aria DMCC disguised as legitimate investments. These acts are described as ‘blatant misappropriation and money laundering’ in the court documents.
Chok denies any fraudulent involvement and claims that FDT was only following Techteryx’s instructions. He attributes the funds’ non-release to Aria’s concerns about Techteryx’s ownership structure, citing anti-money laundering risks. Aria, on the other hand, asserts that the investment terms were clear and that its fund was never intended to serve as a reserve for a stablecoin.
A crisis of confidence that threatens Hong Kong
This case raises concerns about the seriousness of regulation in Hong Kong. Justin Sun calls for a swift response from authorities to avoid a lasting loss of confidence in the financial hub. ‘Hong Kong’s global reputation is at stake, and such scandals must not be allowed to happen again,’ he stressed, announcing a press conference to unveil new evidence.
On the other hand, Binance co-founder Yi He reassured tensions on X by emphasizing that only FDUSD is involved in the lawsuit. It is worth noting that Binance holds nearly $1.7 billion worth of FDUSD tokens.
While stablecoins are meant to provide a reliable and stable alternative to fiat currencies, this latest crisis serves as a reminder that opacity in reserve mechanisms can turn these assets into highly risky instruments.
