$456 million fraud claim sparks crypto controversy

Justin Sun, founder of the Tron (CRYPTO:TRX) blockchain, has alleged that First Digital Trust (FDT) misappropriated $456 million from TrueUSD’s (CRYPTO:TUSD) custodial funds in what he describes as a scandal “significantly worse” than the collapse of FTX (CRYPTO:FTT).

Sun claims the funds were transferred without user authorisation and booked as loans to a Dubai-based company, which he labeled fraudulent.

In an April 5 post on X, Sun compared the two cases, stating that while FTX founder Sam Bankman-Fried (SBF) masked misappropriated funds as collateralised loans using assets like FTT and SRM tokens, FDT directly siphoned off funds without collateral or user knowledge.

He accused FDT CEO Vincent Chok of laundering the money and failing to take responsibility for the alleged theft.

“This is not mere negligence but premeditated and organised theft,” Sun asserted.

The controversy has led to legal action.

Techteryx, the issuer of TrueUSD, filed a lawsuit against FDT and Chok in Hong Kong, accusing them of mismanaging reserves and failing to fulfill redemption requests.

FDT has denied these allegations, maintaining that all FDUSD stablecoins are backed 1:1 by cash and equivalents.

The firm described Sun’s claims as malicious attempts to damage its reputation and vowed to pursue legal action.

Sun’s accusations have also drawn attention from Hong Kong lawmakers, who have called for enforcement measures if the claims are substantiated.

Sun emphasised that Hong Kong’s reputation as a global financial hub is at stake and urged regulators to act swiftly, similar to U.S. authorities during the FTX collapse.

The situation has caused market instability, with FDUSD briefly losing its peg before stabilising above $0.99.

Critics have likened Sun’s tactics to those used by Binance CEO Changpeng Zhao during the FTX crisis, raising concerns about market manipulation.