Hong Kong is taking fraud allegations surrounding First Digital Trust (FDT), the company behind the FDUSD stablecoin, very seriously. Lawmaker Johnny Ng has publicly stated that authorities are prepared to act swiftly if these allegations are proven true.

Ng addressed investor concerns in an X post on April 3, reassuring everyone that despite this recent high-profile issue, Hong Kong’s regulatory framework for crypto is still strong and dedicated to protecting investors.

In his own words:

“Hong Kong has a legal basis and a healthy environment for protecting international investors and the Web3 industry. I urge international investors and tech practitioners not to worry about a single incident and to feel assured in continuing to invest and develop in Hong Kong.”

His statements come in response to accusations from Justin Sun, the founder of Tron, who alleges that FDT mishandled client funds. Sun’s claims have sparked worries about potential weaknesses in how trust companies are overseen in Hong Kong.

Adding to the concern, Ng mentioned that his office has received several complaints this year alone regarding suspected fraud linked to trust company operations. Because of this trend, he emphasized that it’s clearly time to examine and strengthen the rules that govern these types of firms.

He elaborated:

“My office and the Anti-Fraud Alliance have indeed received more than one case this year involving suspected fraud utilizing the characteristics of trust companies. I believe there is a need to discuss how to improve the regulatory framework for relevant trust companies in the future to prevent criminals from exploiting loopholes for fraud.”

Justin Sun vs. First Digital Trust

On April 2, Justin Sun made a serious claim: he stated that FDT is facing insolvency after supposedly misusing close to $500 million of customer funds.

Sun argues that FDT managed to divert TrueUSD (TUSD) reserves belonging to Techteryx by taking advantage of what he describes as insufficient regulatory scrutiny within Hong Kong’s cryptocurrency trust industry.

According to Sun:

“This case shows that there appear to be clear loopholes in Hong Kong’s trust industry that can be used to circumvent financial and banking regulations. This not only poses risks to the public, but also threatens Hong Kong’s reputation as a global financial center.”

However, First Digital Trust isn’t taking these accusations lying down and has strongly refuted them.

In their official response, FDT firmly denied Sun’s allegations, calling them untrue and irrelevant to their FDUSD stablecoin.

FDT explained that the real issue is a dispute concerning TUSD operations. They went further, accusing Sun of launching a public smear campaign to damage their reputation instead of pursuing proper legal channels.

The trust company declared:

“Justin Sun’s baseless accusations won’t distract from Techteryx’s own failures— our stablecoin FDUSD remains fully backed and solvent.”

FDT has confirmed they are getting legal advice and plan to take action to protect their business and good name from what they consider to be a misleading account of events.

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