FDUSD Declines as First Digital Prepares Lawsuit Over Allegations Involving Justin Sun

FDUSD Loses Peg After Justin Sun Alleges Insolvency at First Digital; Company Vows Legal Action

The FDUSD stablecoin briefly lost its dollar peg on Wednesday following explosive allegations by Tron founder Justin Sun, who claimed that First Digital Trust — custodian for FDUSD — is “effectively insolvent.” The Hong Kong-based firm has since denied the claims and promised legal retaliation.

FDUSD slipped as low as $0.87 against Tether (USDT) and $0.76 against USD Coin (USDC) on Binance, its primary trading venue. The sell-off even saw Bitcoin spike close to 100,000 FDUSD before the stablecoin recovered to the $0.96–$0.98 range — still below its intended $1 peg.

Sun’s accusation came via a post on X, in which he alleged that First Digital Trust (FDT) was unable to honor redemption requests and urged users to protect their assets immediately.

The timing of the controversy follows a CoinDesk report that revealed reserve issues at the TrueUSD (TUSD) stablecoin — a project also once overseen by FDT. According to court filings, some TUSD reserves had been locked into unauthorized, illiquid investments. Sun later stepped in to bail out the issuer, raising questions about how intertwined the projects may be.

First Digital responded swiftly, calling Sun’s statements “false and defamatory.” In an official post, the company insisted that FDUSD is fully backed by high-quality reserves, primarily short-dated U.S. Treasuries. “Every dollar backing FDUSD is secure, safe and accounted for,” the company stated.

“This is nothing more than a coordinated effort by Justin Sun to harm a competing stablecoin,” First Digital alleged. “Rather than allow the TUSD situation to proceed through the proper legal process, Mr. Sun has chosen to try and damage our reputation through media and social channels. We will be taking legal action.”

A recent FDUSD reserve attestation reported over $2 billion in backing assets, the bulk held in Treasuries and the rest in short-term deposit products. Despite that, not everyone is reassured.

Stablecoin ratings firm Bluechip issued FDUSD a “C” rating, noting that the reserves could potentially be vulnerable to creditor claims in the event of a bankruptcy. “While FDUSD appears to be backed by quality assets, questions remain about how protected those assets really are from the issuer’s liabilities,” said Bluechip chief economist Garett Jones.

As the situation unfolds, investors are left navigating both technical facts and public accusations — a reminder of how sentiment and trust remain pivotal in the world of stablecoins.