Justin Sun Reports $500M Embezzlement at First Digital Trust to Hong Kong Authorities
Tron founder Justin Sun has once again become the center of a high-stakes financial dispute, this time accusing Hong Kong-based financial firm First Digital Trust (FDT) of misappropriating nearly $500 million in client reserves.
Sun, who played a key role in providing emergency liquidity for TrueUSD (TUSD) in 2023, has now reported the case to Hong Kong authorities, alleging severe financial misconduct that has left FDT “effectively insolvent.”
Sun’s allegations, made public through an X post, follow an ongoing legal dispute between TUSD issuer Techteryx and FDT.
The revelation has already sent shockwaves through the market, with the FDUSD stablecoin, issued by a separate division of First Digital, experiencing a sharp devaluation. The token briefly fell as much as 9%, wiping out approximately $130 million from its market capitalization before recovering slightly. Despite First Digital’s outright denial of the claims, asserting that U.S. Treasuries fully back FDUSD, skepticism remains rampant. With Binance holding over $2.2 billion in FDUSD, concerns about the broader impact of these allegations on the crypto ecosystem continue to escalate. Sun has called for immediate regulatory intervention and pledged to reveal further details at a press conference.
Mismanaged Reserves and Unauthorized Investments
At the heart of the dispute is a lawsuit filed by Techteryx against FDT, detailing a $456 million shortfall in reserves that were supposedly backing TUSD. Court filings indicate that between 2023 and early 2024, funds meant to secure the stablecoin were instead redirected into unauthorized and highly illiquid investments.
These transactions were allegedly funneled through Dubai-based Aria Commodities DMCC, an entity engaged in high-risk ventures, including mining and renewable energy projects. Techteryx claims that the investment strategy deviated from the agreed-upon plan, which dictated that the funds be deposited into the regulated Cayman-registered Aria Commodity Finance Fund (CFF). Instead, FDT allegedly sent the money to Aria DMCC without the issuer’s knowledge or approval. Techteryx describes these transactions as “blatant misappropriation and money laundering,” insisting that the funds were effectively siphoned away from their original purpose.
Adding to the controversy, the lawsuit highlights an additional $15.5 million in undisclosed commissions directed to an entity named “Glass Door,” alongside another $15 million in loans that were falsely classified as investments. First Digital CEO Vincent Chok has refuted these allegations, claiming that the firm was acting under Techteryx’s instructions and that the delays in fund retrieval stem from concerns about the stablecoin issuer’s ownership and compliance profile.
Sun, who previously distanced himself from TUSD despite his financial interventions, has framed the scandal as an indictment of Hong Kong’s financial regulatory framework. “This is a major test for Hong Kong’s credibility as a global financial hub,” he asserted, urging authorities to take swift action against what he describes as a severe case of financial fraud.
Market Repercussions and Regulatory Uncertainty
Sun’s allegations against First Digital Trust have had an impact across the crypto industry, with FDUSD experiencing a notable de-pegging from its $1 price anchor. The token plunged to $0.87 against Tether’s USDT and as low as $0.76 against USDC on Binance before partially recovering to the $0.97 – $0.99 range.
As it stands now, FDT has gone on the offensive, accusing Sun of orchestrating a “smear campaign” to undermine a competitor in the stablecoin space. The firm has vowed to pursue legal action against Sun for reputational damage, maintaining that the situation surrounding TUSD has no bearing on FDUSD.