A custodian based in Hong Kong, First Digital Trust (FDT), filed a defamation lawsuit against Justin Sun for his claims that the company was insolvent since it transferred over $450 million from its custodial clients to a private company in Dubai without their consent and did not return the money.
As a result, the FDUSD stablecoin briefly de-pegged on April 3 following Sun’s accusations. However, it has since virtually recovered.
Moreover, the company requested an injunction to prevent Sun from publishing “similar words” to statements regarding insolvency.
First Digital Trust takes Justin Sun’s remarks seriously and files a lawsuit against him
Earlier, Tron’s founder Justin Sun initially shared an X post claiming First Digital was insolvent. In addition, he held a press conference in Hong Kong late last week where he accused the company of fraud.
This pushed the First Digital Trust to file a lawsuit against Justin Sun for defamation over insolvency allegations. The summons writ, the initial stage of a defamation lawsuit submitted late last week, asked the Hong Kong High Court to grant an order prohibiting Sun from speaking about the issue in the future. Additionally, the company requested an injunction compelling Sun to take back what he previously stated.
In addition, First Digital Trust requested the court to issue an award for damages, without stating the exact amount, for causing damage to Plaintiff’s business and unlawful interference with Plaintiff’s contractual and business relationships.
An initial court hearing date had not yet been established. Sun did not respond to this; however, he shared an X post that he favored any legal action. Furthermore, Sun’s spokesperson remained silent on the issue.
Notably, HCA 680 was the case number in the High Court of Hong Kong.
FDT claims that the FDUSD stablecoin has proven to be resilient
Following earlier accusations, Sun also mentioned that First Digital Trust also broke Hong Kong’s securities laws.
On April 3, FDT stated in a statement on X that they vehemently deny any and all allegations that FDT participated in a coordinated scheme or misappropriation of funds. In the meantime, First Digital reassured customers that it was solvent and that FDUSD was still fully backed and redeemable.
Moreover, FDT claimed that Sun and Techteryx, the company that issues the TrueUSD stablecoin, were trying to shift the blame and avoid their responsibilities to manage TUSD reserves appropriately.
Based on FDT’s argument, “Techteryx and Justin Sun’s suggestion of First Digital Trust being insolvent is not only factually incorrect, but it is a malicious attempt to damage the reputation and market standing of FDT and stablecoin.”
Interestingly, after Justin Sun accused First Digital of being insolvent, the FDUSD depreciated, dropping as low as $0.87. However, the company has since redeemed almost $26 million of stablecoins. Furthermore, First Digital shared another X post highlighting that they kept processing redemptions without issues, proving the FDUSD’s resilience.
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