First Digital Trust (FDT) has denied the insolvency allegations made by Tron founder Justin Sun regarding its stablecoin, FDUSD. FDT stated that its stablecoin is fully backed with US Treasury bills and that all FDUSD reserves are secure and verifiable through documentation. The company emphasized that the dispute involves TrueUSD (TUSD), not FDUSD, and accused Sun of launching a smear campaign to attack a competitor. FDT plans to pursue legal action to protect its rights and reputation and will hold an “Ask Me Anything” event on April 3 to address the situation.
Sun’s public statement urging users to withdraw assets tied to First Digital Trust caused FDUSD to break its peg, falling as low as $0.8726 before partially recovering to $0.9870. Sun raised concerns about the trust licensing process in Hong Kong and the internal risk management of the financial system, calling for regulators and law enforcement to address the issues to prevent further losses and protect Hong Kong’s reputation as a global financial center.
Binance holds approximately 94% of the FDUSD supply, amounting to around $2.2 billion, with $1.5 billion from user deposits and $700 million from corporate funds. The FDUSD/BTC pair has historically been the most traded on the platform, leading to significant operational concerns following the depeg event. The FDUSD crisis highlights the rapid expansion of FDUSD’s role within Binance’s infrastructure, particularly after the platform distanced itself from Binance USD (BUSD) due to US regulatory pressure.
The controlled wind-down of BUSD contrasted with the sudden instability of FDUSD, which was integrated deeply into Binance’s ecosystem. Despite FDUSD reserves reportedly maintaining 111% collateralization, doubts have been cast on the asset’s liquidity and redemption mechanisms. The instability of FDUSD raises regulatory questions for Binance, prompting renewed scrutiny of its due diligence and risk assessment practices, especially concerning third-party stablecoin issuers.
In conclusion, the dispute between Justin Sun and First Digital Trust over the solvency of FDUSD has raised concerns about the stability and transparency of the stablecoin, as well as potential regulatory implications for Binance, which holds a significant amount of the asset. The allegations and subsequent depeg event have led to a contentious situation that will likely impact the reputation and operations of both parties involved. As the legal and regulatory implications unfold, the industry will be watching closely to see how this situation is resolved and what changes may come as a result.
