FDUSD Slips From Peg as First Digital Denies Insolvency Claims Sparked by Justin Sun
Hong Kong-based First Digital is pushing back hard against allegations from Tron founder Justin Sun, who claimed the firm’s trust arm is “effectively insolvent.” The statement sent ripples through the market, with FDUSD — First Digital’s stablecoin — slipping below its $1 peg amid rising investor concerns.
On Binance, FDUSD dropped as low as $0.87 against Tether’s USDT and $0.76 versus Circle’s USDC. In an extreme swing, bitcoin momentarily approached 100,000 FDUSD. While the token later stabilized between $0.96 and $0.98, it remains under pressure.
The sharp move followed a report from CoinDesk on Wednesday, which revealed that reserve assets backing the TrueUSD (TUSD) stablecoin — previously overseen by First Digital Trust (FDT) — were tied up in illiquid investments. TUSD was reportedly rescued by Sun, who stepped in with a bailout.
“First Digital Trust is effectively insolvent and unable to fulfill client redemptions,” Sun posted on X, urging users to move their funds.
First Digital shot back, denying all claims and asserting that its reserves are sound. “First Digital is fully solvent,” the firm said in a public response. “Every dollar backing FDUSD is secure, safe, and fully accounted for — primarily in U.S. Treasury bills.”
The company accused Sun of launching a “smear campaign” in an attempt to undercut a competitor. “Instead of allowing the TUSD issue to be handled through proper legal channels, Justin Sun has resorted to social media attacks,” First Digital said, adding that it intends to “pursue legal action to protect its rights and reputation.”
According to First Digital’s latest reserve report, the $2 billion backing FDUSD is largely invested in U.S. Treasuries, with smaller allocations to repo agreements and fixed deposits.
Still, some concerns remain. Stablecoin watchdog Bluechip rated FDUSD a “C” — a middling score on its F-to-A+ scale — due to the possibility that its reserves may not be fully insulated from the issuer in the event of a bankruptcy.
“FDUSD’s reserves appear generally sound,” said Bluechip’s chief economist Garett Jones. “But we flagged the risk that, if First Digital were to go under, those assets might be used to settle debts. Other stablecoins offer more protection in this scenario.”
The clash between Sun and First Digital — and the market’s jittery reaction — underscores just how fragile confidence can be in the stablecoin sector, even when assets appear backed by quality reserves.
