- First Digital USD (FDUSD) stablecoin lost its dollar peg after Tron founder Justin Sun claimed its issuer was insolvent.
- First Digital Trust denied the allegations, stating FDUSD’s $2.5 billion is fully backed by U.S. Treasuries.
- The dispute appears related to a separate issue where Sun reportedly provided a $456 million bailout to Techteryx after alleged fund misappropriation.
Justin Sun accused First Digital Trust of insolvency on Wednesday, causing the stablecoin First Digital USD (FDUSD) to lose its dollar peg. FDUSD, which is prominently used on Binance, dropped as low as $0.95 following Sun’s comments on X (formerly Twitter), according to data from CoinGecko.
Sun urged “regulators and law enforcement to take swift action” and warned that First Digital Trust is “unable to fulfill client fund redemptions.” The Tron founder later doubled down, describing the insolvency as a “factual statement” and advising the company’s partners to cut ties “as soon as possible to protect your assets.”
First Digital Trust Denies Allegations
First Digital Trust quickly denied Sun’s accusations, calling them “completely false” and part of a “smear campaign.” The Hong Kong-based firm stated that its stablecoin, worth approximately $2.5 billion, is backed one-to-one with U.S. Treasuries. The company also announced it would pursue legal action to protect its reputation.
The firm clarified that the dispute involves TUSD (TrueUSD) and not FDUSD, stating, “Every dollar backing $FDUSD is completely secure, safe and accounted for with US backed T-Bills.”
Reports of Related Bailout
According to a CoinDesk report published Wednesday, Sun recently helped bail out a company called Techteryx, which acquired TrueUSD in 2020. Citing Hong Kong court documents prepared by U.S. law firm Cahill Gordon & Reindel, CoinDesk reported that Techteryx needed a $456 million bailout after its reserves were allegedly misappropriated by First Digital Trust.
The court documents reportedly claim First Digital Trust diverted cash to a Dubai-based entity instead of a designated Cayman Islands investment vehicle. When Techteryx attempted to redeem funds between mid-2022 and early 2023, it allegedly received “little or no funds back.”
First Digital Trust noted on X that it has not yet had the opportunity to defend itself in court against these allegations.
Despite FDUSD’s relatively small market cap, Coinbase’s Head of Product, Conor Grogan, called the disruption “a big deal.” FDUSD has been particularly popular among Binance traders, with the exchange holding approximately 94% of the stablecoin’s circulation.
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