Justin Sun Declares First Digital Trust Insolvent, FDUSD Depegs as Binance Holds $1.67B

Justin Sun has announced that First Digital Trust (FDT), the Hong Kong-based issuer of the stablecoin FDUSD, is effectively insolvent and unable to fulfill client fund redemptions. Sun has urged users to take immediate action to secure their assets, highlighting significant loopholes in the trust licensing process in Hong Kong and internal risk management.

Following Sun's statement, FDUSD, which is intended to be 1:1 USD-pegged, has experienced a significant depeg, dropping to as low as 90 cents. This depeg has led to a loss of approximately $130 million in market capitalization for FDUSD, with the stablecoin now trading at a nearly 10% discount to its dollar peg.

First Digital Trust also managed the reserves for another stablecoin, TUSD, which faced a $500 million shortfall due to large-scale fraud. Justin Sun previously intervened to bail out TUSD, but the current situation with FDUSD suggests broader issues within the trust's operations.

Binance, a major supporter of FDUSD, holds 1.67 billion FDUSD according to their latest proof of reserves. The exchange has yet to respond to the unfolding situation, leaving investors and users in a state of uncertainty as they await Binance's response.

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