Tron founder Justin Sun has initiated a legal process against First Digital Trust, the issuer behind the FDUSD stablecoin, accusing it of embezzling nearly $500 million in client funds.

On a Apr. 3 post in X, Sun said he had met with Hong Kong lawmaker Johnny Wu to report the case and submitted related materials to local regulators and judicial authorities. The alleged embezzlement centers on FDT’s handling of client assets, which Sun claims have been misappropriated. 

Sun described the incident as “a major international financial fraud involving traditional financial institutions and web3 platforms,” and said it was time to expose how “loopholes in the trust industry” are being exploited. 

On the same day, Sun hosted a live podcast to further expose what he called serious irregularities, warning that FDT was effectively insolvent and still operating under the cover of a public trust.

Johnny Wu publicly addressed the case, confirming that he met with the complainants and raised the issue in the Legislative Council. “If the allegations are true, enforcement authorities will definitely take action,” he said. Ng emphasized Hong Kong’s strong legal system, stating, “International investors should not worry about a single incident.”

Sun’s accusations, which began on Apr. 2, had briefly caused First Digital USD (FDUSD) to lose its dollar peg and drop as low as $0.87. The stablecoin has since stabilized, trading at $0.99 as at press time. In response to Sun, FDT denied all claims and said FDUSD remains fully backed 1:1 by cash and U.S. Treasury bills. 

FDT dismissed Sun’s claims as “false information” and a “smear campaign.” The company warned it would take legal action to defend its name and accused Sun of spreading false information. Binance, which holds most of the FDUSD supply, confirmed the stablecoin’s 1:1 backing in an update. Its latest attestation showed $2.05 billion in reserves as of Mar. 1. 

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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Tron (TRX) founder Justin Sun has staked $100 million worth of Ethereum (ETH), according to the blockchain analytics platform Arkham.

Arkham notes that Sun’s staked ETH will yield $3 million worth of Ethereum per year in passive income.

In addition to staking ETH, Sun also teased that Tron’s native asset, TRX, would soon be available on the Ethereum competitor Solana (SOL).

Sun, a polarizing figure in the crypto community, says it is currently “Tron meme szn [season].” He also notes that the issuance of top stablecoin USDT on Tron recently reached a new all-time high of $64.7 billion.

The U.S. Securities and Exchange Commission (SEC) recently paused its civil case against Sun. According to recent court filings, the Tron founder and the regulatory agency jointly asked United States District Judge Edgardo Ramos if they could “move to stay [the] case to allow the parties to explore a potential resolution.” Ramos granted the application a day later.

In 2023, the SEC accused Sun – who went on to invest millions of dollars into President Donald Trump’s decentralized finance platform World Liberty Financial – and his crypto firms of fraud, selling unregistered securities and manipulating the price of the digital asset TRX via wash trading.

TRX, a layer-1 asset, is trading at $0.23 at time of writing. The 10th-ranked crypto asset by market cap is down nearly 1% in the past day but up nearly 3% in the past week.

ETH is trading at $2,033 at time of writing. The second-ranked crypto asset by market cap is up nearly 7% in the past 24 hours and more than 8% in the past seven days.

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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