Justin Sun Says First Digital Trust Scandal Is Worse Than FTX Collapse

TRON founder Justin Sun has sparked new controversy by declaring that the alleged misconduct by First Digital Trust (FDT), the issuer behind the FDUSD stablecoin, is “significantly worse” than the now-infamous collapse of FTX. 

In a detailed post on X (formerly Twitter), Sun laid out damning claims, stating that FDT siphoned off over $450 million in user funds without consent, structure, or collateral, a move he describes as pure theft.

With a $50 million bounty now launched to aid investigations and growing pressure on Hong Kong authorities to act, the FDT case is quickly becoming one of the most discussed scandals in the crypto industry this year.

Justin Sun’s Allegations: “FDT Is Ten Times Worse Than FTX”

On April 5, 2025, Justin Sun took to X to detail what he claims are shocking differences between the FTX fraud and the actions taken by First Digital Trust. 

While both cases involved serious misappropriation of user assets, Sun argues that FDT’s misconduct lacks even the minimal structural justification that FTX tried to maintain.

He explained that FTX founder Sam Bankman-Fried at least attempted to frame his use of customer funds as collateralised loans, using holdings like FTT and SRM tokens. While still fraudulent, there was an internal system that portrayed these actions as structured borrowing.

In contrast, Sun accused First Digital Trust of transferring $456 million from the TrueUSD (TUSD) reserve without any customer consent or collateral, and booking the transfer as loans to a suspicious third-party company in Dubai. These actions, according to Sun, amounted to an outright rug pull of custodial assets.

To further highlight the difference, Sun pointed out that SBF used misappropriated funds to invest in legitimate firms like Robinhood and AI company Anthropic rather than funnelling money into opaque, fraudulent entities. 

He also acknowledged that SBF eventually responded to legal pressure, hired lawyers, and worked to recover some user assets.

Vincent Chok Zhuo, CEO of FDT, was criticised for allegedly ignoring the scandal completely and showing no willingness to accept responsibility. 

Sun described Chok’s behaviour as deceptive and malicious, accusing him of pretending nothing had happened after the funds were exposed as missing.

Read more: Justin Sun Sells 5.37 Million EIGEN Tokens

A Threat to Hong Kong’s Financial Reputation

Beyond the alleged criminal activity itself, Justin Sun’s post also aimed at what he views as a looming reputational crisis for Hong Kong. He warned that how the city’s regulators respond to this scandal will serve as a test of its seriousness as a global financial centre.

Sun called for authorities in Hong Kong to take action similar to what was seen in the US during the FTX collapse after the fall of FDUSD. In that case, regulators acted quickly by appointing liquidators, arresting SBF, and working to recover lost assets to protect public confidence in the financial system.

“If Hong Kong fails to act swiftly, decisively, and effectively, it risks being seen as a haven for crypto fraud,” Sun wrote. He urged lawmakers and regulators to clamp down on the alleged scheme and punish those responsible to prevent further damage to the region’s credibility.

Sun also confirmed he met with Hong Kong lawmaker Johnny Wu to discuss the potential fallout and explore pathways for regulatory action. The message was clear, inaction could undermine the city’s ambition to become a global crypto and fintech hub.

Read more: The FDUSD Depeg: Insolvency Claims

Launch of a $50 Million Bounty and Next Steps

To put weight behind his accusations, Justin Sun announced a $50 million bounty programme to assist investigators, whistleblowers, and journalists in uncovering further details about the FDT scandal.

The bounty aims to incentivise transparency and accelerate the gathering of evidence against those involved. Sun’s proactive stance is also linked to his role as an advisor to Techteryx, which has ties to TrueUSD (TUSD), the stablecoin allegedly affected by FDT’s actions.

Sun stated that when FDT was first exposed for draining the TUSD reserves, he was approached for financial support. In response, he agreed to backstop user losses — a move that gives him both a financial and reputational interest in ensuring accountability.

It’s worth noting that FDUSD, the stablecoin issued by FDT, has been widely used in centralised exchanges and DeFi platforms over the past year. Any loss of trust in its backing could have broader implications for the crypto stablecoin sector, particularly for other custodial assets that rely on similar operational models.

The crypto community is watching closely to see if Hong Kong regulators will act swiftly. While the full extent of the alleged fraud is still being uncovered, the call for accountability is gaining momentum across the industry.

Conclusion

The First Digital Trust scandal is quickly becoming one of the biggest tests of regulatory resolve in 2025. 

With Justin Sun’s explosive comparison to FTX and allegations of an unstructured $456 million embezzlement, the pressure is mounting for authorities in Hong Kong to take urgent action.

Unlike FTX, which at least masked its wrongdoing under the guise of collateralised loans and investments, Sun alleges that FDT engaged in a direct and deliberate theft of customer funds. 

The lack of transparency, oversight, or response from FDT’s leadership has only added fuel to the fire.

Whether this scandal triggers regulatory reform, criminal charges, or major shifts in stablecoin trust remains to be seen. But one thing is clear: the crypto industry will not forget how this case is handled.

Frequently Asked Questions

What is the First Digital Trust scandal about?
Justin Sun claims First Digital Trust misappropriated $456 million from TUSD reserves and transferred it to a suspicious Dubai entity without user consent or collateral.

Why does Justin Sun say it’s worse than FTX?
Sun argues that FTX used a flawed internal structure with pledged assets, while FDT simply took funds with no transparency, investment logic, or effort to recover them.

What happens next?
Hong Kong regulators are being urged to investigate. Sun has launched a $50 million bounty to support the exposure of the case, and discussions with lawmakers are already underway.

Investor Caution 

While the crypto hype has been exciting, remember that the crypto space can be volatile. Always conduct your research, assess your risk tolerance, and consider the long-term potential of any investment.

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