TRON founder and CEO Justin Sun has intensified his accusations in the emerging First Digital Trust scandal, claiming the firm embezzled over $500 million of its clients’ funds.
According to a post on his social media platform X, Justin Sun compared the emerging scandal to the FTX bankruptcy case filed in November 2022, claiming the First Digital Trust scandal was “ten times worse” than the FTX debacle.
Over $500 Million Allegedly Lost
In the shocking revelation, Sun stated that while FTX may have misused customer funds, they maintained an internal system that showed records such as pledged loans, which was completely absent in the FDT case. Sun alleges that FDT stole nearly $500 million from the firm’s custodial funds without the client’s knowledge or authorization. FTX filed for bankruptcy in November 2022 after revealing an $8 billion asset shortfall. According to Sun’s statement:
“FDT simply siphoned off $456m from TUSD’s custodial funds without client authorization or knowledge, and booked as loans to a dubious third-party Dubai company without any collateral.”
SUN Accuses FDT of Apparent Indifference
Regarding the now-convicted FTX founder Sam Bankman-Fried, Justin Sun suggested that SBF misappropriated user funds, noting that he diverted much of the stolen funds into capital investments in firms such as Robinhood and AI Company Anthropic.
However, in the First Digital Trust scandal, Sun alleges that FDT diverted the stolen money into private entities for personal gain without any meaningful investment.
Taking a swipe at FDT CEO Vincent Chok Zhuo, Sun called out his apparent indifference following the exposure of the alleged misconduct. The TRON founder accused Chok of showing no intention of taking responsibility compared to SBF, who made every effort to recover user assets and cooperate with authorities. Sun lamented:
“Vincent Chok has acted deceptively and maliciously, pretending nothing happened when exposed.”
Hong Regulators Urged to Take Swift Action
First Digital Trust denied Sun’s allegations and claimed it wasn’t insolvent. In a statement, FDT asserts that Sun’s information was malicious and meant to damage the company’s reputation and that of its stablecoin FDUSD. The stablecoin issuer has vowed to sue Justin Sun at a time when FDUSD’s market value has remained above the $0.99 range.
Considering the magnitude of the alleged First Digital trust scandal, the TRON founder calls upon Hong Kong regulators to take swift action similar to how US authorities dealt with the collapse of FTX. Sun suggested that Hong Kong’s reputation was at risk and that it would depend on how the First Digital Trust scandal was handled. Sun stated:
“Hong Kong must act swiftly, decisively, and effectively like its US counterparts. We cannot allow the fraudsters to continue their pyramid scheme against the public.”
Conclusion
Justin Sun’s remarks come amid growing controversy surrounding FDT, which saw the FDUSD stablecoin briefly debug. Sun has gone further to issue a $50 million bounty to help recover the stolen funds and expose the alleged misconduct. Media reports indicate Sun’s allegations have already drawn the attention of Hong Kong’s regulators, who have promised to take enforcement actions if the claims are valid.
Frequently Asked Questions (FAQs)
What is the first digital US dollar?
FDUSD is a stablecoin launched in June 2023. It operates on the Ethereum and BNB Chain networks. The stablecoin is fully backed by cash equivalents that can be verified via independent audits.
How is the value of FDUSD maintained?
Like all other stablecoins, FDUSD is fully backed by cash; each token is redeemable 1:1 with the US dollar.
Why did FDUSD lose its value?
FDUSD depegged or lost its parity with the dollar after TRON founder Justin Sun accused First Digital of insolvency. However, the firm has since redeemed nearly $26 million in stablecoins.
What are the risks of FDUSD?
The latest incident surrounding FDUSD highlights that stablecoins can easily face reserve liquidity issues or regulatory risks. Investors must, therefore, be careful where they put their hard-earned funds.
Appendix: Glossary to Key Terms
Stablecoin: A stablecoin is a cryptocurrency whose value is pegged or tied to that of another currency, commodity, or financial instrument.
Depeg: In the world of stablecoins, depegging occurs when a stablecoin, whose value is pegged to another currency, decreases or increases.
FTX scandal: The FTX scandal refers to the collapse of the cryptocurrency exchange FTX in November 2022 following allegations of fraud and the mismanagement of customer funds.
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