A detailed explanation of the whole story of Justin Sun accusing FDT of defrauding 456 million US dollars

In the early morning of April 3, Justin Sun posted a post accusing First Digital Trust (FDT), the issuer of the stablecoin FDUSD, of being insolvent and unable to redeem customer funds. As a result, FDUSD was seriously decoupled for a short period of time. Binance has frequently launched Launchpool activities in the past two months. Many users should have a certain understanding of FDUSD. FDUSD is also one of the very important stablecoins of Binance Launchpool (in addition, there may be USDC), which also means that many people hold a certain amount of FDUSD. Therefore, this FDUSD decoupling also has a certain degree of impact on many users who often participate in Binances new listings-many users have suffered losses due to market panic selling. Odaily Planet Daily sorted out the whole incident as follows:

Justin Sun posted a post late at night accusing FDUSD issuer First Digital Trust (FDT) of being insolvent

Justin Sun posted on X at 11:21: “First Digital Trust (FDT), the issuer of the stablecoin FDUSD, is actually insolvent and unable to fulfill its obligations to redeem customer funds. Users are strongly advised to take immediate action to protect their assets. At the same time, regulators and law enforcement agencies are urged to take prompt action to resolve these issues and prevent further significant losses.”

Sun Yuchen’s post was not without warning, but it was a little too sudden to catch everyone off guard. In recent days, Sun Yuchen has been releasing news that he will release a major industry event on April 3. The pre-release version that everyone can see on social media is an invitation letter from Sun Yuchen, which roughly reads: Sun Yuchen will hold a press conference in Hong Kong to expose a major international financial fraud Ponzi case involving traditional financial institutions and Web3 platforms in Hong Kong.

At this point, Justin Sun responded to his post a few days ago. Influenced by his post, FDUSD fell below $0.9 in a short period of time, reaching a low of $0.8726.

Wintermute’s dip buying and Binance’s rumor refutation

While everyone was FUDing FDUSD, Wintermute did the opposite. According to Ai Yi, an on-chain analyst, within 20 minutes after Justin Sun posted the article, market maker Wintermute withdrew a total of 31.36 million FDUSD from Binance in four batches, becoming the largest FDUSD holding entity other than Binance, holding approximately 65.46 million tokens, accounting for approximately 2.5% of the total circulation. Wintermute seemed to be supporting FDUSD.

Of course, Wintermute’s behavior cannot cause a rapid rebound in FDUSD. What users are most looking forward to is Binance’s voice. Binance Sisi first said in a group that FDUSD can be dealt with 1:1, and Sun Yuchen’s post may be due to some beef between FDT and Sun Yuchen’s previous project.

Later, Binance co-founder He Yi also posted on X: This incident was caused by Sun Yuchens lawsuit against TUSD, not FDUSD.

But the problem is that many retail investors sold FDUSD in panic, and slowly returned to the anchor after a statement from Binance officials. Users criticized Binance for replying in the group instead of issuing an official announcement. In response, He Yi said that the Binance team was also contacting FDUSD, and the announcement should be issued by them instead of Binance. Binance has done a full audit, but the incident is a legal dispute between Justin Sun and FDT, and Binance is not very clear about it.

The dispute started with TUSD: FDT’s “inappropriate behavior” and Sun Ge’s rescue

Coindesk also published an article immediately to confirm the previous dispute between Justin Sun and FDT. In addition to being the issuer of FDUSD, FDT is also the asset management institution of TUSD.

The story begins in 2020. After taking over the management of TrueUSD from TrueCoin in December 2020, it appointed the Hong Kong-based trustee First Digital Trust (FDT) to manage its stablecoin reserves. In the subsequent court prosecution, it was learned that FDT had committed some improper acts:

1. FDT invested its stablecoin reserves in the Aria Commodity Finance Fund (Aria CFF) registered in the Cayman Islands, but about $456 million was improperly diverted to Aria DMCC, an unauthorized independent entity located in Dubai (the actual controllers of the two entities are husband and wife). The plaintiffs alleged that the funds remitted to Aria DMCC were blatant misappropriation and money laundering, and these operations were unauthorized;

2. First Digital CEO Vincent Chok is accused of funneling approximately $15.5 million in undisclosed commissions to an entity called “Glass Door” and of structuring an additional approximately $15 million in unauthorized trade finance loans from FDT to Aria DMCC, which were then retroactively misclassified as legitimate fund investments.

FDT CEO Chok has since denied any wrongdoing or involvement in any fraudulent scheme in the above process. He said that FDT acted purely as a fiduciary intermediary and executed transactions strictly in accordance with the instructions provided by Techteryx and its representatives. The company was not responsible for independently evaluating or providing advice on these investment decisions.

Sun Yuchens dispute with FDT also emerged here. It was precisely because of FDTs investment and use that Techteryx almost failed to recover its investment from Aria CFF between mid-2022 and early 2023, and Aria-related entities were accused. Sun Yuchen stepped in during this period to provide emergency liquidity support for TUSD, which was set up as a loan.

On-chain data shows that more than 80% of TUSD is controlled by Justin Suns team, and the addresses marked by Arkam as suspected of Justin Sun account for 50% of the total. Among them: JustLend has about 146 million TUSD, accounting for 30%, and JustLend is also the largest use case of TUSD. TUSD can be pledged for other assets such as USDT. Currently, JustLends largest loan is USDT, with a loan amount of 63.44 million US dollars.

At present, the $456 million of funds has not been repaid by Nanyong, and Sun Yuchen’s loan is also in an outstanding state.

Audit report of FDT’s Late Night Space and FDUSD

Back to FDUSD, as He Yi said before, the clarification of FDUSD should be done by FDT. One of FDT’s accounts, First DIgital, also made a “ statement on Sun Yuchen’s false accusations ” on XSpace. FDT CEO Vincent Chok accepted and answered questions from users in real time. After Odaily’s summary, Vincent Chok’s answers were divided into several points:

1. Sun Yuchen’s accusation comes from an ongoing legal case involving TUSD, which has been going on for more than two years (the content of the previous CoinDesk), and I am not sure why it is brought up now. In addition, Hong Kong companies are following legal compliance;

2. We will not go bankrupt. We have asset certificates from a third party, which are available on the official website. You can check them at any time. The reserve fund is sufficient to support 1:1 FDUSD redemption at any time.

3. Our funds and customer funds are completely separate. Customers have their own FDD accounts operated by us. If we become insolvent, the customers fund reserves will not be affected;

4. We are a fully regulated entity, we have passed all the AML and KYC checks, we have cooperation with banks and they are happy with us. I cant control the FUD outside. But actually, the way to be able to survive in this industry is to ensure full transparency to our customers and users.

After Space ended, Odaily went to its official website to check the reserve certificate. The reserve certificate for February published by FDT in March showed that as of 21:00 ET on February 28, 2025 (9:00 HKT on March 1, 2025)

The total circulation of FDUSD is 2,041,924,819.94 pieces. The total reserve assets of FDUSD are 2,051,348,188.70 USD. The reserve assets include:

1. Total holdings of US Treasury Bills: USD 1,733,452,142.60 (accounting for approximately 84.5%)

2. Overnight Reverse Repo Agreements: USD 33,000,000.00 (approximately 1.6%)

3. Fixed Deposits: USD 145,880,000.00 (approximately 7.1%)

4. Cash in US Dollars: $139,016,046.10 (about 6.8%)

That is to say, if the reserve certificate is completely correct, FDUSD supports 1:1 redemption.

Stablecoins cut again? Sun Ge and FDT feud, retail investors pay the bill

Finally, Justin Sun once again posted a message emphasizing that FDT has gone bankrupt and stated that everything will be decided by judicial authorities and regulatory agencies.

As of the time of posting, Sun Yuchens statement did not add any more important evidence, and the courts lawsuit against Techteryx is still ongoing. At this point, the FUD of FDUSD has basically settled, and FDUSD has gradually returned to the anchor of $0.98. Once bitten by a snake, because of the UST incident before, many users are very cautious about the depegging of stablecoins, and will run away as soon as the FUD occurs, and some even sell at the lowest point before the rebound.

But for retail investors, it seems like today is April Fools’ Day: FDUSD has returned to around $0.98, Justin Sun is still emphasizing that FDT is bankrupt, the FDT lawsuit still exists, Binance still supports FDUSD, and the money in your hands is 10% less.

As mentioned above, many users in the community questioned why Binance only publicly clarified the FDUSD incident on social media when FDUSD fell below $0.9, saying that it was just to make retail investors sell at the bottom while large exchange traders bought at the bottom.

In response to this, Binance co-founder He Yi once wrote that the official announcement of FDUSD requires a process, capital verification and time. Binance Sisi only said that FDUSD can be redeemed 1:1 because she saw some people panic selling in the group and couldnt bear it.

There are less than 10 hours left before Justin Sun’s Hong Kong press conference at 13:30 on April 3. Odaily Planet Daily will continue to track and report relevant news and progress in the conference.

This article is sourced from the internet: A detailed explanation of the whole story of Justin Sun accusing FDT of defrauding 456 million US dollars

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