First Digital Trust sues Justin Sun for defamation related to bankruptcy allegations

First Digital Trust (FDT), a custody company (located in Hong Kong, has filed a lawsuit against Justin Sun for defamation, related to allegations that the company became insolvent after transferring more than $450 million from client custody assets to a private company in Dubai without their consent and failing to return the funds.

As a result, the FDUSD stablecoin briefly lost its peg on April 3rd after Justin Sun made those allegations. However, since then, FDUSD has nearly fully recovered.

In addition, First Digital Trust has also requested a ban on Justin Sun from continuing to make similar statements regarding the insolvency issue.

First Digital Trust officially files a lawsuit

Previously, Tron founder Justin Sun posted on social media X accusing First Digital of insolvency. Not only that, he also held a press conference in Hong Kong last weekend, directly accusing the company of fraudulent behavior.

This has led First Digital Trust to officially file a lawsuit against Justin Sun for defamation, related to allegations of insolvency. The lawsuit was filed last weekend and is the first step in the defamation litigation process, requesting the Hong Kong High Court to issue an injunction preventing Justin Sun from making further statements on this matter in the future. Additionally, the company also requested the court to order Sun to retract his previous statements.

In addition, First Digital Trust also requested the court to rule for damages, although it did not specify the exact amount, due to the losses that Sun's statements have caused to the plaintiff's business operations, as well as the unlawful interference in the company's contractual and business relationships.

Currently, no date for the first trial has been set. Justin Sun has not made an official statement; however, he shared a post on X expressing his support for any legal action. Sun's spokesperson also declined to comment on the matter.

The case number is HCA 680 at the Hong Kong Court of Final Appeal.

FDUSD remains stable

After the initial allegations, Justin Sun continued to claim that First Digital Trust had violated Hong Kong's securities laws.

On April 3rd, FDT posted a statement on platform X, in which the company "vehemently denies all allegations" that they have engaged in collusion or asset appropriation. At the same time, First Digital reassured customers that the company remains fully solvent and FDUSD is still fully backed, redeemable as usual.

In addition, FDT accused Justin Sun and Techteryx — the company behind the stablecoin TrueUSD )TUSD( — of attempting to distract and evade responsibility for properly managing TUSD reserves.

According to FDT's argument:

"The statements by First Digital Trust about the insolvency of Techteryx and Justin Sun are not only false but also malicious actions aimed at tarnishing the reputation and market position of FDT as well as the stablecoin FDUSD."

Notably, after Justin Sun made allegations about the potential for payment loss, the price of FDUSD dropped, at one point hitting a low of $0.87. However, since then, the company has processed nearly $26 million in stablecoin conversions, while continuing to post on the X platform to emphasize that the conversion activities are still proceeding smoothly, demonstrating the resilience and stability of FDUSD.

Disclaimer: This article is for informational purposes only and is not investment advice. Investors should conduct thorough research before making any decisions. We are not responsible for your investment decisions.

• First Digital converts 26 million FDUSD after losing its peg, dismissing Sun's bankruptcy claims.
• FDUSD loses peg, down 10% after being accused by Justin Sun of impending bankruptcy
• The US dollar index )DXY( has decreased to a level at which the price of Bitcoin once rose by more than 500%.

Minh Anh

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