First Digital USD (FDUSD), the world’s fifth-largest stablecoin, bounced back after a brief dip to $0.87 on April 2. The price drop followed accusations from TRON founder Justin Sun who alleged that FDUSD’s issuer, First Digital Trust (FDT), was insolvent, causing a market panic.
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The crisis was sparked when Sun filed a lawsuit, claiming that FDT could not meet client redemption requests, with much of the panic centered around TUSD, another stablecoin managed by FDT. In response to Sun’s accusations, Wintermute, a major market maker, withdrew over $30 million from FDUSD, further destabilizing its price.
Accusations from Justin Sun
Justin Sun filed a lawsuit and publicly accused First Digital Trust (FDT) of insolvency on Wednesday, claiming that the firm was unable to fulfill client fund redemptions.
FDT is responsible for managing the reserves of the TUSD stablecoin, which were meant to be invested in the Aria Commodity Finance Fund (Aria CFF). However, $456 million was allegedly redirected to an unauthorized entity in Dubai, raising concerns about liquidity and the company’s financial stability.
In reality, Techteryx manages TUSD. FDT was appointed by Techteryx to handle TUSD’s reserve funds after Techteryx acquired the stablecoin in 2020. Justin Sun claims he helped rescue TUSD’s reserves when $456 million became illiquid.
In response, First Digital strongly denied Sun’s allegations, calling them “completely false” and emphasizing that First Digital is “completely solvent.”
“This is a typical Justin Sun smear campaign to try to attack a competitor to his business,” the company .
It also confirmed that FDUSD is fully collateralized on a 1:1 basis and that their redemption processes are operating without issues.
Wintermute’s Role
In response to the accusations, the market reacted quickly, causing FDUSD’s value to drop to $0.89. During this time, one of the largest market makers, Wintermute, withdrew over $30 million of FDUSD from Binance, further contributing to the stablecoin’s price drop.
However, on Thursday, a Lookonchain report revealed that since FDUSD depegged, Wintermute had transferred $75 million of FDUSD to First Digital Labs.
“They likely bought $FDUSD at a discount during the depeg and redeemed it 1:1 through First Digital—making a solid profit,” Lookonchain states.
In other words, Wintermute potentially took advantage of FDUSD’s depeg by purchasing millions of tokens at a lower price and redeeming them at face value.
Why This Matters
The incident highlights the intense competition in the stablecoin market, where accusations and market panic can quickly cause significant volatility. The depeg and potential arbitrage opportunities reveal vulnerabilities in the ecosystem, demonstrating how rapidly investor confidence can be shaken.
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