- TrueUSD’s reserves became stuck in First Digital Trust, requiring a bailout loan from Justin Sun after becoming effectively insolvent.
- The stablecoin company settled with the SEC over misrepresenting its “1:1” backing claims while facing redemption issues.
- Current attestations reveal most of TrueUSD’s $500 million reserves remain at First Digital Trust in assets “not readily convertible to cash.”
Court filings in Hong Kong and reporting from CoinDesk have revealed that Techteryx, the company behind TrueUSD (TUSD), required a bailout loan from Justin Sun after its reserves became stuck in First Digital Trust, leaving the stablecoin effectively insolvent and unable to redeem tokens. This contradicts TrueUSD’s public claims during this period that it maintained “1:1” backing by US dollars.
The insolvency issues stemmed from TrueUSD’s relationship with First Digital Trust, its primary asset manager. According to court documents, First Digital invested TrueUSD’s reserve funds in trade finance and later allegedly directed some assets to another firm called “Glass Door” without Techteryx’s permission.
These problems formed the basis of the Tron-s-justin-sun-bailed-out-tusd-as-stablecoin-s-usd456m-reserves-were-stuck-in-limbo”>Securities and Exchange Commission (SEC) case against TrueUSD, which claimed the stablecoin misrepresented its “1:1” backing. TrueUSD settled the case without disputing the complaint. SEC documents revealed the fund First Digital marketed to TrueUSD was described elsewhere as suitable only for investors who could “bear the risk of losing most or all of their investment.”
Current Reserve Status
Even today, attestations prepared by Moore Hong Kong show that nearly all of TrueUSD’s reserves, worth over $500 million, remain held at First Digital. The accounting firm notes these reserves are “reported at cost” and that its procedures “do not include an examination over the fair market value of the investments.”
Management notes signed by Jennifer Jiang acknowledge that assets invested by First Digital are not “readily convertible to cash” and that “Techteryx has already engaged alternative liquidity, separate from the reserves of USD denominated collateral.” Notably, TrueUSD’s website no longer claims “1:1” backing.
Sun’s Involvement and Control Questions
While Justin Sun has claimed he doesn’t own Techteryx or TrueUSD, he has been identified as an “Asia Market Advisor” and “partner market maker” for the stablecoin. The bailout loan suggests deeper business ties than previously disclosed.
Current token distribution shows heavy concentration of ownership. On Ethereum, 80% of TUSD tokens are held in three addresses that received all their TUSD from Sun-advised HTX. On Tron, nearly 90% are held in two addresses with similar origin.
The Hong Kong lawsuit also alleges “secret payments” to bank accounts connected to Legacy Trust, another firm run by Chok that previously worked with TrueUSD, characterizing these as “illicit kick-backs.” More seriously, TrueUSD claims Chok stated First Digital Trust “was raising funds from other customers and would repay the plaintiff with such funds,” behavior described as “akin to a ‘Ponzi’ scheme.”
TrueUSD and First Digital did not respond to requests for comment before publication.
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