Sun Yuchen exposes the incident of FDT and others misappropriating nearly $500 million in custody assets, calling for strengthened regulation to protect public interests

On April 3, TRON founder Justin Sun revealed a major financial fraud case involving the misappropriation of TUSD (TrueUSD) fiat reserves at a press conference. In this case, financial institutions including the Hong Kong licensed trust company First Digital Trust Limited (FDT), Legacy Trust Company Limited (Legacy Trust), and a private company in Dubai conspired to misappropriate $456 million of client funds. Justin Sun stated that while providing financial support to Techteryx, the owner of TUSD, he noted that this case not only threatens public interests but also exposes serious loopholes in the trust industry, jeopardizing Hong Kong's reputation as a global financial center.

According to information disclosed at the press conference, after Techteryx acquired TUSD from TrueCoin LLC (TrueCoin) in December 2020, TrueCoin was retained and entrusted to select financial service providers and coordinate international operations, with this arrangement terminated in July 2023. During this period, TrueCoin, in its fiduciary role, selected FDT as the custodian of TUSD's statutory reserve assets, managing over $500 million in reserve funds. At the same time, TrueCoin also recommended the Aria Commodity Finance Fund ("Cayman Fund") to Techteryx as a primary investment.

In subsequent transactions, TrueCoin allegedly colluded with institutions such as FDT to transfer $456 million of TUSD statutory reserves to a private company in Dubai wholly owned by the wife of the Cayman Fund's investment manager through false documents and unauthorized transfers. Vincent Chok, CEO and Director of FDT and Legacy Trust, directly approved these illegal transactions, severely violating fiduciary duties.

In 2023, due to FDT's failure to pay interest on certain investments made on behalf of Techteryx, Techteryx appointed an independent professional team to conduct a comprehensive investigation into FDT, discovering that a significant amount of client funds under custody had been misappropriated, while also seeking support from Justin Sun. Justin Sun provided assistance to Techteryx using his personal funds, ensuring that TUSD had sufficient liquidity to protect the interests of all TUSD holders.

It is reported that as early as September 2024, the U.S. Securities and Exchange Commission (SEC) issued a public statement accusing TrueCoin of participating in fraudulent activities involving TUSD. These fraudulent activities occurred after Techteryx's acquisition, while TrueCoin was still operating TUSD. The SEC stated, "TrueCoin profited by making false representations about the safety of investments, while exposing investors to significant, undisclosed risks."

Justin Sun stated, "These assets are public funds. To protect public interests and maintain Hong Kong's reputation as an international financial center, I decided to provide liquidity support. While I am shocked by the scale of this fraud, I also feel a great sense of responsibility."

Justin Sun called for Hong Kong regulators to take decisive action to close loopholes and prevent further losses of public funds. His decision to publicly address this issue and expose the fraud was motivated by a desire to see all fraudsters held accountable under the full force of the law, "They should never have the opportunity to defraud the public again in Hong Kong or elsewhere under the guise of licensed institutions."

In this case, the ability of licensed institutions like FDT to freely misappropriate public funds indicates that regulatory shortcomings still exist, while the complex cross-jurisdictional criminal network highlights the necessity for global cooperation in combating financial fraud. Justin Sun stated, "As a member of the industry, I choose to expose the truth and assist TUSD to protect the public and promote the healthy development of the industry. Fraudsters must be severely punished by law."