A prominent stablecoin depegged from the US dollar Wednesday morning after it was alleged that its Hong Kong-based issuer was bankrupt

In a new thread on the social media platform X, crypto billionaire and Tron (TRX) founder Justin Sun urged his followers to “take immediate action” to protect any assets they held in FDUSD, a stablecoin managed by First Digital Trust (FDT).

Sun also called for regulators to step in and take action to prevent further losses and save Hong Kong’s reputation as a financial power.

“First Digital Trust (FDT) is effectively insolvent and unable to fulfill client fund redemptions. I strongly recommend that users take immediate action to secure their assets.

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 to address these issues and prevent further major losses. Hong Kong’s reputation as a global financial center is at stake, and similar financial fraud incidents must never happen again.”

FDUSD dipped to about $0.949 earlier in the day but has since recovered and is trading for $0.982 at time of writing, a decrease of 1.27% during the last 24 hours.

In response, the FDUSD has denied Sun’s claims and will pursue legal action to defend its reputation.

“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.

Every dollar backing FDUSD is completely, secure, safe and accounted for with US-backed T-Bills. The exact ISIN numbers of all of the reserves of FDUSD are set out in our attestation report and clearly accounted for.

This is a typical Justin Sun smear campaign to try to attack a competitor to his business. As we told the reporter at CoinDesk, we have not yet had the opportunity to defend ourselves and instead of letting the TUSD matter be dealt with in court, Justin has instead resorted to a coordinated social media effort to try to damage FDUSD as a business competitor.

FDT will pursue legal action to protect its rights and reputation.”

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First Digital Trust, the issuer of the FDUSD stablecoin, has refuted recent allegations by Justin Sun. 

First Digital Trust labeled the allegations as false and unrelated to its operations. In a statement on X, FDT clarified that the controversy involves TrueUSD, not FDUSD (FDUSD).

“This dispute is with TUSD and not with $FDUSD. First Digital is completely solvent,” FDT posted.

The firm emphasized that FDUSD is fully backed by U.S. Treasury bills, with reserve details transparently outlined in its attestation reports.

Justin Sun’s insolvency claims

On April 2, Justin Sun claimed that First Digital Trust was insolvent after mismanaging nearly $456 million in TrueUSD reserves. 

Legal filings revealed that the funds were diverted into unauthorized investments, prompting Sun to provide emergency funding to Techteryx.

“This is a typical Justin Sun smear campaign to attack a competitor,” FDT stated, accusing Sun of attempting to damage its business through a coordinated social media effort rather than allowing the TUSD dispute to be resolved in court.

FDT reaffirmed its solvency and the security of FDUSD reserves, adding that all funds are accounted for with verifiable ISIN numbers. 

The company also announced plans to take legal action to defend its rights and reputation.