Justin Sun Sparks Controversy with First Digital Trust Insolvency Claims

Today, Justin Sun, the prominent founder of Tron, declared that First Digital Trust (FDT), a Hong Kong-based financial institution, is insolvent and urged users to sever ties to protect their assets.

The post quickly gained traction, igniting discussions about the stability of FDT and its associated stablecoin, FDUSD. Sun’s statement was direct, claiming that FDT’s insolvency is a factual matter and that its founder, Vincent Chok, may face consequences for alleged fraudulent actions. He left the resolution of those consequences to the justice system and regulators, adding a layer of gravity to his warning.

The market reaction was swift and significant. FDUSD, a stablecoin issued by FDT, experienced a sharp depegging event, dropping to a low of $0.8726 before recovering to $0.98. This volatility wiped approximately $130 million off FDUSD’s market cap, raising concerns about the stability of stablecoins in the face of such allegations.

Sun’s claims are rooted in earlier reports of mismanagement, where $456 million in TrueUSD (TUSD) reserves, managed by FDT, were allegedly frozen in unauthorized investments. Sun reportedly stepped in to bail out TUSD, further fueling his criticism of FDT’s operations. The controversy has also drawn attention to Hong Kong’s regulatory environment, with Sun calling for swift action to address loopholes in the trust licensing process.

Vincent Chok and FDT’s Background Under Scrutiny

Vincent Chok, the CEO of FDT, has been thrust into the spotlight amid these allegations. Chok founded FDT in 2019, building on his extensive experience in commercial real estate and capital management.

Before FDT, he held leadership roles at companies like Kamino Corporation and Sprint Capital Limited, focusing on financial services and asset management. FDT, a regulated custodian in Hong Kong, has positioned itself as a bridge to the Web3 ecosystem, notably launching FDUSD in June 2023. The stablecoin, backed by U.S. Treasury bills, gained prominence after being listed on Binance, especially following the discontinuation of Binance’s native stablecoin, BUSD.

FDT has denied Sun’s allegations, asserting that the dispute concerns TUSD, not FDUSD, and emphasizing its solvency. They wrote:

“This is a typical Justin Sun smear campaign to try to attack a competitor to his business. As we told the reporter at CoinDesk, we have not yet had the opportunity to defend ourselves and instead of letting the TUSD matter be dealt with in court, Justin has instead resorted to a coordinated social media effort to try to damage FDUSD as a business competitor.

FDT will pursue legal action to protect its rights and reputation.”

The firm stated that FDUSD remains fully backed, with transparent reserve details available in its attestation reports. However, the market’s reaction and Sun’s planned press conference on April 3, 2025, suggest that this saga is far from over.