Background and Key Timeline
In April 2025, the cryptocurrency industry was rocked by a high-profile scam involving $500 million. Justin Sun, founder of TRON, was implicated in a custody dispute related to the stablecoin TUSD (TrueUSD). The case centers on allegations of collusion between Hong Kong trust institution First Digital Trust (FDT) and Singaporean fund YAI SUKONTHABHUND. Techteryx Ltd. (the company holding TUSD) filed a lawsuit in a Hong Kong court, accusing its custodian FDT of illegally misappropriating $456 million in reserve funds, which put TUSD at risk of decoupling.
The incident can be traced back to 2020, when Techteryx acquired the TUSD business and entrusted its reserves to FDT for management. However, in 2023, TrueCoin (the original operator of TUSD) and FDT were accused of fabricating documents and transferring funds to a shell company in Dubai. It wasn’t until March 2025 that Techteryx’s audit uncovered anomalies and sought help from Justin Sun, who provided an emergency personal loan of $460 million to temporarily stabilize the market. This dispute not only exposed the shortcomings of the custody institution but also raised serious questions about the transparency of the underlying assets of stablecoins.
Stablecoin Mechanisms and Industry Vulnerabilities
As a stablecoin pegged 1:1 to the US dollar, TUSD relies on sufficient custody of reserve funds. However, this incident has revealed three major risks:
Custody Oversight Failure:
FDT, a licensed institution, failed to invest funds into high-liquidity assets as per the agreement and instead transferred them to an affiliated party through fraudulent operations.
Gray Area Operations Across Jurisdictions:
Funds were moved from Hong Kong to Dubai and the Cayman Islands, exploiting regulatory differences to conceal misappropriation.
Lack of Industry Transparency:
TUSD users are unable to verify reserve fund statuses in real time and must rely on delayed third-party audit reports.
Justin Sun played the role of a “market savior” in this event, although his involvement also stirred controversy. Some believe he attempted to deflect public scrutiny from the compliance concerns surrounding his affiliated projects (such as TRON) by offering a $50 million bounty to trace the clues. Additionally, the lag in Hong Kong’s financial regulatory response has become a focal point, prompting Sun to publicly call for banks to extend services to Web3 companies and reduce dependence on traditional trust arrangements.
Market Impact and Investor Insights
This scam has triggered a ripple effect across the cryptocurrency market:
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Stablecoin Trust Crisis:Another stablecoin linked to FDT, FDUSD, plummeted by 24%, with its market cap evaporating by over $300 million.
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Accelerated Regulatory Intervention:The Hong Kong Securities and Futures Commission may soon require custody institutions to disclose real-time reserve data and implement independent audits.
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Potential Industry Reshuffle:Investors might shift their preference toward more transparent stablecoins like USDT and USDC, thus driving the development of decentralized custody solutions.
For ordinary investors, this case serves as an important warning:
Choose Compliant Custody Platforms:
Prioritize platforms that are strictly regulated and provide public proof of reserves, such as those employing third-party audit mechanisms like JuCoin.
Beware of “Overpromised” Projects:
High-yield stablecoins may hide complex fund operations, so carefully assess the background of the issuer.
Monitor Regulatory Developments:
Jurisdictions like Hong Kong and Singapore are rapidly improving digital asset regulations; staying informed about policy changes can help mitigate risks.
Future Trends and Risk Mitigation
As the case proceeds through the Hong Kong courts, its outcome may set a regulatory benchmark for cryptocurrency custody. If Techteryx prevails, it could drive global mandates for stricter fund segregation by custody institutions. Additionally, whether Justin Sun’s bounty effort to recover funds succeeds will impact public confidence in the industry’s ability to self-correct.
In the long term, the demand for decentralized finance (DeFi) protocols and on-chain transparent audit tools is likely to rise. Investors are encouraged to learn how to use blockchain explorers to verify asset flows and thereby reduce information asymmetry risks.
Neason Oliver
