- The FDUSD stablecoin lost its peg, declining by 5% after TRON founder Justin Sun alleged that its issuer, First Digital Trust, is insolvent.
- Justin Sun urged investors to secure their assets, highlighting the need for government intervention to prevent further losses.
- First Digital denied the allegations, claiming it's a "typical Sun smear campaign."
In an X post on Wednesday, TRON founder Justin Sun accused Hong Kong-based financial institution First Digital Trust (FDT) of being insolvent, causing its FDUSD stablecoin to briefly drop below its US Dollar (USD) peg.
Justin Sun accuses First Digital Trust of insolvency
TRON founder Justin Sun alleged that First Digital Trust (FDT), the issuer of FDUSD stablecoin, is insolvent and unable to meet the redemption needs of users.
Sun appealed to investors to withdraw their assets from FDT, pointing out weaknesses in Hong Kong's trust licensing process and flaws in the internal risk management of its financial system. He also called for Hong Kong law enforcement to intervene and prevent further damage.
"I urge regulators and law enforcement to take swift action to address these issues and prevent further major losses," Sun wrote in an X post.
Following the news, FDUSD dropped 5% below its US Dollar (USD) peg but quickly saw a recovery.
FDT denied Sun's insolvency claims, stating that its disputes do not involve FDUSD. The company also stated that Justin Sun's accusations are a "smear campaign to try to attack a competitor to his business."
FDT further highlighted that FDUSD is fully backed by US Treasury bills, and its reserves are accounted for in their attestation report.
Justin Sun is a major backer of the USDD and USDD 2.0 stablecoins issued by the TRON DAO, the governance organisation of the blockchain he founded.
Sun’s clash with FDT came after CoinDesk reported that he bailed out Techteryx's TrueUSD stablecoin when close to half a billion dollars of its reserves became illiquid, according to Hong Kong court documents released by the company.
The documents suggest that Techteryx acquired the TrueUSD (TUSD) stablecoin from TrueCoin in December 2020 and placed its reserves under the management of First Digital Trust.
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