FDUSD Briefly Loses Dollar Peg Amid Insolvency Allegations From Justin Sun; First Digital Denies Claims, Plans Legal Action

Stablecoin FDUSD temporarily lost its 1:1 peg to the U.S. dollar on Wednesday following allegations from Tron founder Justin Sun, who claimed that First Digital Trust, the custodian managing FDUSD’s reserves, was insolvent. First Digital has firmly denied the accusation and says it will pursue legal action to defend its reputation.

FDUSD fell to as low as $0.87 against Tether (USDT) and $0.76 against USD Coin (USDC) on Binance — its primary listing exchange — before rebounding to around $0.96–$0.98, still shy of its intended $1 value. The volatility triggered concern among users and traders, especially as the news followed closely on the heels of related issues with the TrueUSD (TUSD) stablecoin.

Earlier in the day, CoinDesk reported that some of TUSD’s reserves were locked in illiquid investments, according to court documents. First Digital Trust had previously been assigned to manage TUSD’s reserves. Tron’s Justin Sun, who intervened in the TUSD situation, took to social media to accuse FDT of being “effectively insolvent” and urged users to act swiftly to safeguard their assets.

In a formal statement posted on X, First Digital pushed back against the claims, stating that the company remains fully solvent and that all FDUSD reserves are held in secure assets, including U.S. Treasury bills. “Every dollar backing FDUSD is secure, safe and accounted for,” the company said.

First Digital further asserted that Sun’s public comments amounted to a “smear campaign” aimed at damaging a competing stablecoin. “Rather than allow the legal process regarding TUSD to play out in court, Mr. Sun has chosen to launch a coordinated media campaign to harm FDUSD,” the company said. “We will pursue legal action to protect our rights and reputation.”

FDUSD’s most recent reserve report indicated that the $2 billion backing the stablecoin is primarily allocated to short-term U.S. Treasuries, along with a smaller portion in fixed deposits and repurchase agreements.

Despite the company’s assurances, stablecoin ratings agency Bluechip issued a “C” grade for FDUSD. The group expressed concern that the reserves may not be bankruptcy-remote, meaning that in a worst-case scenario, they could be used to pay off debts of First Digital or related entities.

“While the underlying assets appear sound, the legal structure raises questions,” said Bluechip’s chief economist Garett Jones. “There’s uncertainty around how funds would be handled in the event of insolvency — and that’s where safer alternatives may offer more protection.”