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Hongji Feng
Author
Hongji Feng
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Why Trust Cryptonews
Key Takeaways:
- Justin Sun says First Digital Trust has misused TUSD reserves.
- Allegations include violations of fiduciary duty, unlicensed investment activity, and bribery.
- Sun launched a bounty program to recover lost funds and encourage whistleblowers.
- The claims raise broader questions about regulatory accountability in Hong Kong.
Justin Sun has accused Hong Kong-based custodian First Digital Trust (FDT) of misappropriating more than $500 million in TUSD assets through a series of unauthorized transactions and concealed transfers.
In a detailed social media post on April 8, Sun identified seven alleged breaches of law and fiduciary duty, beginning with the misuse of custodial funds held on behalf of TUSD.
First Digital Trust Accused of Diverting Client Funds
He claimed FDT rerouted the assets to ARIA DMCC without client consent, violating Hong Kong’s Securities and Futures (Client Money) Rules, which require segregated custody and prohibit unauthorized withdrawals.
The accusations extend to FDT’s investment activities. Though registered as a Trust or Company Service Provider (TCSP), FDT holds no SFC license to conduct regulated investment activities.
Sun said FDT facilitated investments through entities including ARIA, TrueCoin (founded by Alex De Lorraine), and Crossbridge/Finaport, bypassing regulatory oversight and offering no transparency into fund deployment.
He also alleged criminal fraud under Hong Kong’s Theft Ordinance, citing false records and deceptive statements issued to cover up the reallocation of client assets.
According to Sun, documents were falsified to suggest the funds remained intact and properly invested.
Other claims include the laundering of funds through offshore structures and the acceptance of undisclosed commissions—conduct that Sun said could violate Hong Kong’s Prevention of Bribery Ordinance and trigger investigation by the Independent Commission Against Corruption.
“Each of us should act as soon as possible—don’t wait until it’s too late and live to regret it,” Sun wrote.
Justin Sun Launches $50 Million Bounty, Seeks Whistleblowers
Sun previously announced a $50 million bounty to help recover TUSD funds allegedly misappropriated by First Digital Trust.
The program invites whistleblowers to submit leads through a dedicated portal, with rewards contingent on verified recovery outcomes.
“This is not just about money—it’s about justice,” Sun said.
Sun compared the case to the FTX situation, where misuse of client funds was at least framed as collateralized loans backed by equity and token holdings.
In contrast, he said FDT moved funds offshore with no disclosures, no collateral, and no pretense of structure.
Frequently Asked Questions (FAQs):
Yes. The Securities and Futures Commission (SFC) and the Independent Commission Against Corruption (ICAC) have authority to investigate violations related to fraud, unlicensed activity, and bribery.
FTX framed misuse of funds as collateralized loans; here, the funds were allegedly moved off-balance sheet with no structure, collateral, or disclosure to clients.
FDT and individuals involved could face criminal prosecution, civil liability, regulatory penalties, and permanent loss of license.
