By CryptoDavid

Translated and Edited by Carine.W

The crypto market never lacks disputes, and conflicts between key figures can directly impact asset prices.

On the evening of April 2, 2025, Justin Sun posted on X, claiming that "First Digital Trust (FDT) is effectively insolvent and unable to fulfill client fund redemptions." He strongly advised users to immediately protect their assets and called for Hong Kong regulators to intervene to maintain the financial center's reputation.

Following the post, the price of FDUSD rapidly declined. According to CoinMarketCap data, FDUSD fell to a 24-hour low of $0.8811 (on April 2, 2025), with its total market cap shrinking by approximately $130 million, reflecting market concerns about FDUSD's insufficient reserves.

Binance, as the main trading platform for FDUSD, quickly responded. Sisi pointed out in the community that FDUSD could be redeemed at a 1:1 ratio; meanwhile, He Yi (also known as "Yi Jie") posted a clarification stating that Justin Sun's lawsuit involved TUSD, not FDUSD, attempting to differentiate between the two controversies.

After this series of posts and responses, FDUSD's price partially recovered, reaching $0.989 at the time of writing, still below its $1 peg.

FDUSD, TUSD, FDT... these similar-looking letter combinations can easily cause confusion. What exactly happened behind this dispute that caused the asset price to de-peg?

FDUSD & FDT

Some users may be unfamiliar with FDUSD and the company FDT.

FDUSD is a stablecoin pegged 1:1 to the US dollar, launched in June 2023 by First Digital Labs (referred to as FDT), which belongs to Hong Kong's First Digital Limited. As a trust company, FDT is responsible for managing FDUSD's reserves, ensuring its stable value, and making it suitable for trading, remittances, and DeFi applications.

Following Justin Sun's post, FDT also responded, signaling that FDUSD remains secure: "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."

At the same time, FDT claimed that Justin Sun's recent allegations against First Digital Trust are completely incorrect, stating that this dispute is related to TUSD, not $FDUSD.

While both parties maintain their positions, how did TUSD suddenly enter the picture?

FDT Misappropriated TUSD Reserves? Justin Sun Provides $456 Million to "Fill the Hole"

Behind this dispute, there might be a more complex web of grievances involving another stablecoin, TUSD (TrueUSD), and the role FDT played in it.

Although TUSD and FDUSD have similar names, they are completely different stablecoins issued by different entities.

TUSD is currently issued by another company called Techteryx, and the relationship here is: FDT previously served as the custodian of its reserves, responsible for managing TUSD's funds.

According to Coindesk, after acquiring TrueUSD from TrueCoin in December 2020, Techteryx appointed Hong Kong-based trustee First Digital Trust (FDT) to manage its stablecoin reserves.

However, Justin Sun's allegations and subsequently disclosed information suggest that FDT may have had serious issues in managing the TUSD reserves.

I'll translate this Chinese text into English while ensuring technical accuracy, consistency, and professional crypto industry standards:

Translation

According to an exclusive report by Hong Kong's Sing Tao Daily, FDT's CEO Vincent Chok has been accused of fraud amounting to $9.5 billion (approximately HK$74 billion). The core allegations stem from FDT's improper operations while managing TUSD reserves.

Between 2023 and early 2024, TUSD reserves experienced a significant shortfall because FDT unauthorized transferred $456 million (approximately HK$3.5 billion) to Dubai-based company Aria Commodities DMCC for high-risk resource development project investments.

These investments had extremely low liquidity, causing TUSD reserves to become unredeemable in a timely manner, resulting in a liquidity crisis.

Sing Tao Daily also pointed out that Vincent Chok is accused of receiving $15.5 million (approximately HK$120 million) in secret commissions through an entity called "Glass Door."

This behavior has been characterized as "fraudulent misrepresentation and misappropriation of funds," directly leading to a severe shortfall in TUSD reserves.

Techteryx (TUSD's issuer) subsequently filed a lawsuit in Hong Kong courts through US law firm Cahill Gordon & Reindel, seeking compensation to recover losses.

Techteryx's documents show that due to TrueUSD reserves being trapped in non-redeemable investments, its balance sheet experienced a $456 million deficit between 2023 and early 2024.

When TUSD fell into a liquidity crisis, Justin Sun played a key role.

According to Sing Tao Daily's disclosure, Justin Sun provided emergency funding support for TUSD between 2023 and early 2024, helping to isolate 456 million TUSD and ensuring retail users could continue to redeem, thus preventing a larger market panic.

While this action temporarily stabilized TUSD, it also brought the conflict between Justin Sun and FDT to the surface.

Justin Sun's assistance was not without compensation. According to CoinDesk, the funds he provided were injected in the form of a loan, and the $456 million funding gap was not a small amount.

Facing these allegations, FDT CEO Vincent Chok quickly responded.

He denied all accusations, claiming that FDT only acted as a custodial intermediary, strictly following Techteryx's instructions in executing fund operations, and was not responsible for independently evaluating investment decisions. Chok also pointed out that Aria refused early redemption of funds due to anti-money laundering (AML) and know-your-customer (KYC) issues, which might be one of the reasons leading to the liquidity crisis.

Breakdown of Relationships Between Parties and Assets

From the public information available, here's what you need to know about this dispute and how all the players and assets connect:

• TUSD is a stablecoin issued by Techteryx that previously hired FDT to manage its reserves

• FDT allegedly misappropriated $456 million into high-risk investments, triggering a TUSD liquidity crisis

• Justin Sun stepped in with emergency funding to stabilize TUSD, but this led to him publicly calling out FDT as "bankrupt" - which caused FDUSD to lose its peg and sparked market panic

• It's important to understand that while FDT manages (or managed) both FDUSD and TUSD, they're entirely separate stablecoins. FDUSD is FDT's own flagship product supposedly backed by US Treasury bonds, whereas TUSD is issued by Techteryx with FDT simply acting as the custodian

The positions of all parties have gradually become clear:

FDT firmly maintains its innocence, accusing Justin Sun of "defamation," and plans to defend its reputation through legal channels; meanwhile, Justin Sun is publicly calling for regulatory intervention, attempting to expose FDT's issues to the public; and Techteryx is pursuing accountability through litigation to recover its losses.

Binance, as the main trading platform for FDUSD, quickly clarified the situation and moved to reassure the market.

However, the complete truth behind this dispute has yet to be fully revealed.

The issues with FDT that "Justin Sun " pointed out may need to be answered through subsequent legal proceedings and regulatory investigations. Market trust in stablecoins has been tested as a result, and investors should perhaps begin to reassess the reserve transparency and operational compliance of stablecoins.