FDUSD Stablecoin Drops as First Digital Responds to Justin Sun Allegations with Legal Threats

FDUSD Peg Wobbles as Justin Sun Sounds Alarm Over First Digital’s Solvency; Legal Battle Looms

FDUSD, the stablecoin issued by Hong Kong’s First Digital, slipped from its $1 peg this week following explosive allegations from Tron founder Justin Sun, who claimed that the company managing its reserves is “effectively insolvent.” The accusation has sparked a wave of investor concern and triggered a sharp market reaction — but First Digital insists it’s on solid financial ground and plans to take legal action against what it calls a coordinated smear campaign.

The stablecoin briefly fell as low as $0.87 against Tether (USDT) and $0.76 against USD Coin (USDC) on Binance, the primary exchange for FDUSD. It has since stabilized, trading between $0.96 and $0.98 — still below parity with the dollar.

The turmoil comes in the wake of a CoinDesk report detailing how reserves behind the TrueUSD (TUSD) stablecoin had become entangled in illiquid investments. First Digital Trust (FDT), a custodian tied to First Digital, was involved in managing those reserves. As details emerged, Sun took to social media to issue a stark warning: “First Digital Trust is effectively insolvent and unable to fulfill client redemptions,” he wrote on X. “I strongly recommend users secure their assets immediately.”

First Digital responded with a firm denial, calling the insolvency claim “completely false.” In a public statement, the company said, “FDUSD is fully backed, with reserves held in U.S.-backed T-Bills and other low-risk instruments. Every dollar is accounted for.” The company further accused Sun of weaponizing social media in an attempt to undermine a rival stablecoin.

“This is a calculated smear campaign,” the firm said. “Instead of allowing the courts to address the TUSD matter, Justin Sun has chosen to publicly attack FDUSD, a competitor, using misinformation. We will pursue legal action to protect our business and reputation.”

FDUSD’s latest reserve attestation shows roughly $2 billion in backing, mostly held in U.S. Treasury bills, with smaller allocations in repos and bank deposits. However, the recent controversy has renewed scrutiny of stablecoin reserves and how they’re structured.

According to Bluechip, a firm that evaluates stablecoin safety, FDUSD earned a “C” rating — citing concern over the reserves’ legal protections. “While FDUSD’s assets appear solid, there’s uncertainty around whether they are legally separated from the issuer’s liabilities in a bankruptcy scenario,” said Garett Jones, Bluechip’s chief economist. “That puts it in a riskier position compared to more conservative stablecoins.”

As the situation unfolds, FDUSD users and the broader crypto community are left navigating an increasingly murky legal and reputational battle — one that could have ripple effects for stablecoin trust and transparency across the industry.

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