FDUSD Depegs After Insolvency Allegations from Justin Sun

In Brief:

Binance-backed stablecoin FDUSD dropped to $0.95 after claims its issuer is insolvent

First Digital Trust denies wrongdoing and threatens legal action

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FDUSD, the stablecoin backed by Binance, temporarily lost its 1:1 peg with the US dollar after Tron founder Justin Sun alleged that its issuer, First Digital Trust, is “effectively insolvent.” The token dropped to $0.95 before recovering slightly to $0.97, according to CoinGecko data.

Sun claimed on X (formerly Twitter) that the Hong Kong-based custodian was "unable to fulfill client fund redemptions" and called on regulators to intervene. The post quickly triggered a wave of concern as FDUSD is widely used on Binance, which holds over 94% of the token’s circulating supply.

First Digital Trust responded publicly, stating that FDUSD is fully backed by U.S. Treasuries and calling Sun’s remarks a “smear campaign.” The firm also announced its intent to pursue legal action to protect its reputation.

This controversy comes as court documents revealed Sun previously injected $456 million to rescue Techteryx, the firm behind TrueUSD (TUSD), another stablecoin whose reserves were reportedly mishandled by First Digital Trust. The documents allege that reserve cash was diverted to a Dubai-based entity, bypassing its intended Cayman Islands investment vehicle.

Sun doubled down on his position, labeling his insolvency claim a "factual statement" and urging other partners to cut ties with the firm to avoid further risk.

Despite its relatively small market cap, FDUSD has played a key role in Binance trading pairs, especially since Binance phased out support for BUSD. Coinbase’s Conor Grogan described the fallout as “a big deal,” given the token’s trading footprint on the world’s largest exchange.

As the situation unfolds, market observers await further legal developments and regulatory responses.

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