A major scandal has rocked the stablecoin world, as Justin Sun, founder of the Tron blockchain, publicly accused First Digital Trust (FDT) of misappropriating $500 million in client reserve funds. The accusation has triggered a sharp drop in FDUSD’s price, briefly depegging to $0.89 before rebounding to $0.987.

According to Sun, FDT—which manages reserves for both FDUSD and TrueUSD (TUSD)—became insolvent after $456 million allegedly became illiquid under the control of Aria Capital Mgt and its affiliated fund. In response, Sun reportedly executed a quiet bailout of TUSD to prevent further collapse.

Regulatory Tension and Legal Threats Sun has urged Hong Kong regulators to close what he describes as “systemic loopholes” in local trust laws. Meanwhile, First Digital Trust has denied all claims, stating it acted under instructions from Sun’s nominees and that the firm remains solvent. FDT’s CEO announced plans to pursue legal action against Sun and published on-chain data to support its defense.

Market Reaction and Arbitrage As panic briefly set in, trading firm Wintermute moved 75 million FDUSD to First Digital Labs, likely capitalizing on the depeg by redeeming tokens at full face value. Binance later published an attestation confirming that FDUSD remained fully backed 1:1.

The Bigger Picture This high-profile clash between a blockchain founder and a major stablecoin custodian raises serious questions about transparency, governance, and counterparty risk in the stablecoin sector. While FDUSD appears to have stabilized for now, the incident could reshape investor sentiment and drive demand for more rigorously audited alternatives.

Should Investors Care? Episodes like this remind investors to closely evaluate the backing and structure behind stablecoins, especially in volatile markets. Arbitrage opportunities may surface, but so do risks when trust begins to erode—even temporarily.