First Digital Trust Rebuts Justin Sun's Insolvency Claims

First Digital Trust , the Hong Kong-based issuer of the stablecoin First Digital USD , has firmly rejected allegations made by Tron founder Justin Sun regarding its financial stability. Sun had asserted that FDT was insolvent and unable to fulfill client fund redemptions, urging users to withdraw their assets and calling for regulatory intervention.

In a public statement, FDT labeled Sun's claims as "completely false," emphasizing that the dispute pertains to TrueUSD and not FDUSD. The company asserted its full solvency and highlighted that each FDUSD token is backed one-to-one by U.S. Treasury bonds. FDT provided International Securities Identification Numbers for these bonds in their certification reports to substantiate their claim.

The controversy emerged when Sun accused FDT of being unable to redeem $501 million in TUSD reserves, alleging mismanagement and insolvency. He cautioned users to secure their assets promptly and called upon Hong Kong regulators to take swift action. These statements led to a temporary depegging of FDUSD from the U.S. dollar, with the stablecoin's value dropping by 5% and its market capitalization decreasing by $130 million.

FDT responded by attributing the redemption delays to Anti-Money Laundering and Know Your Customer compliance issues, clarifying that the concerns were specific to TUSD and did not affect FDUSD. The firm characterized Sun's remarks as a coordinated smear campaign against a competitor and announced intentions to pursue legal action to safeguard its rights and reputation.

This incident is set against a backdrop of ongoing legal challenges for Sun. The U.S. Securities and Exchange Commission has previously charged him and his companies with the unregistered offer and sale of crypto asset securities, including Tronix and BitTorrent . Court filings allege that Sun generated $31 million in proceeds through manipulative trading practices, such as wash trading. Recent reports indicate that Sun and the SEC are exploring a potential resolution to these civil fraud charges.