FDUSD Stablecoin Depegs Following Justin Sun’s Claims: Here’s What Happened

FDUSD saw a sharp depeg after Justin Sun stated he had information suggesting that First Digital Trust had lost $500 million in reserves backing the stablecoin. As a result, the platform allegedly cannot fully redeem the supply of FDUSD if issuers attempt to cash out.

Simply put, First Digital Trust should be considered insolvent. 

The announcement sparked panic among investors, leading many to rapidly liquidate their FDUSD holdings. Moreover, this rush triggered the token’s depeg.

Shortly after the statement, FDUSD dropped by around 9%, wiping out roughly $130 million in market capitalization. As of the time of writing, the price has partially recovered and is trading near $0.994, according to CoinMarketCap.

First Digital Trust, which holds and safeguards the reserves backing the stablecoin, strongly denies the accusation. Its representatives insist that FDUSD is fully backed by U.S. Treasury bills and that its reserves remain under strict regulatory oversight. 

Justin Sun’s Claims and the Dispute Between Techteryx and First Digital

Justin Sun addressed users on the social platform X, urging them to review their holdings immediately. He claimed that First Digital Trust was insolvent and unable to meet client redemption requests for collateralized assets.

Sun referenced a CoinDesk article that highlighted an ongoing dispute between Techteryx (the entity behind the TrueUSD stablecoin) and First Digital Trust, which was entrusted with managing the stablecoin’s reserves starting in late 2020.

By 2023, Techteryx had reportedly encountered issues recovering its investments. Some of the reserves were allegedly diverted into resource extraction and renewable energy projects, significantly complicating the recovery process. 

At the time, it was Justin Sun who helped resolve the situation.

First Digital’s Response and Market Implications

First Digital representatives emphasized that all FDUSD reserves are securely held in conservative financial instruments, primarily U.S. Treasury bills. They called Justin Sun’s allegations unfounded and accused him of attempting to discredit a competitor. The company also warned that it may take legal action against individuals spreading false or misleading information.

Meanwhile, crypto analysts note that the situation could have significant ripple effects across the ecosystem, especially on platforms like Binance, where FDUSD is widely used for trading.

BTC/FDUSD is historically the most traded pair on Binance, so this disruption is a big deal,

wrote Coinbase executive Conor Grogan on X.

With concerns mounting, investors and traders are closely monitoring the developments. Justin Sun has announced a press conference, where he’s expected to share further details about the Techteryx lawsuit. 

Related: Justin Sun’s Playbook: How He Built TRON and Disrupted Crypto