Key Takeaways
- Sun loaned $500 million to bail out TUSD stablecoin from de-pegging.
- The de-pegging was linked to $500 million in illiquid investments made by FDT.
- Sun called out Hong Kong legislation loopholes that allowed a firm like FDT to raise funds.
Tron founder Justin Sun has stepped in with a staggering $500 million bailout to rescue the TUSD stablecoin from a deepening crisis.
Sun said the decision to help stabilize the stablecoin to protect its holders wasn’t easy as the massive loan amount came out of his own personal funds.
Sun Calls Out Hong Kong Trust Laws
The court filing shows that Tron founder Justin Sun bailed out TUSD after nearly $500 million worth of its assets were deemed illiquid.
Sun called out the loopholes in the Hong Kong legislation that allowed virtually “insolvent” firms to issue a stablecoin.
He pointed out that First Digital Trust (FDT), the company behind the stablecoin, had negative equity, meaning its total liabilities exceeded aggregate assets.
However, FDT has been in negative equity for three consecutive years without accounting for the massive losses resulting from its large-scale misappropriation of user assets.
Sun said the government allowed the firm to raise billions in public funds despite such a balance sheet.
“The real question for Hong Kong regulators and law enforcement agencies is this: How could this happen under their watch? FDT’s very existence at this very moment is a mockery of the rule of law in Hong Kong.”
Sun cited the example of international banking regulations, where banks are subject to stringent capital adequacy requirements or risk losing their banking licenses.
Sun Optimistic “Justice Will Be Served”
Sun called out Hong Kong legislation loopholes in an X post, blaming a few bad actors for misappropriating funds in TUSD reserves. He added that he is optimistic that justice will be served in the case as the bailout for the stablecoin “didn’t come easy.”
“I am optimistic that justice will be served in due course and look forward to working alongside Johnny Ng, a Hong Kong Legislative Council member, to advocate for more robust trust regulation and better web development.”
Sun added that he is “absorbing the risk for $500m. But token holders who would otherwise suffer heavy losses have dodged a bullet, and safeguarding the industry from the collateral damage from FDT’s rug pull is right.”
Techteryx purchased TrueUSD from TrueCoin in December 2020. Following the acquisition, Techteryx recruited First Digital Trust (FDT), a Hong Kong-based fiduciary, to manage its stablecoin reserves under particular instructions.
FDT has now been accused of failing to implement these.
The firm claimed that the Hong Kong-based FDT made illiquid investments without permission.
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