On the evening of April 2, 2025, the world of cryptocurrency was shaken by an explosive accusation from Justin Sun, founder of the crypto project Tron.
Sun accused First Digital Trust (FDT), the issuer of the stablecoin $FDUSD, of fraud, alleging that the company had misappropriated a staggering $456 million in funds related to its management of the reserves backing a different stablecoin, $TUSD.
This accusation went over like a lead balloon. The price of $FDUSD started crashing, dropping to nearly $0.87 before slowly climbing back up. The depegging of this token, used for all sorts of applications and trading on the exchange Binance, was a major event and led to a significant loss of trust in the crypto community.
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The Flash Crash: How $FDUSD Depegged and Rebounded
Initial fallout from Sun’s accusations was swift and severe. The claims of insolvency, as they surfaced in the next few days, sent panic sellers into the market, and the price of $FDUSD fell well below its usual $1 peg. On Binance, the digital asset dropped as low as $0.87 and, according to some reports, dipped to $0.76 when compared to USDC. The stablecoin’s sudden depeg sent shockwaves through the platform and across the wide range of users affected by the digital assets built on top of it, especially those in the Launchpool.
The situation turned, however, when Binance co-founder Yi He, also known as @heyibinance, stepped in to address the concerns. He clarified that the matter causing the depeg wasn’t about reserves related to $FDUSD but rather about a legal dispute concerning $TUSD. Yi He explained that the allegations about mismanagement had to do with FDT mismanaging the reserves of $TUSD, and not with any issues pertaining to $FDUSD itself. With this clarification, the market seemed to calm down, and the price of $FDUSD made a rebound to $0.987, nearly back to its usual pegged value.
🚨 Justin Sun Accuses FDT (the issuer of $FDUSD) of a $456M Fraud, $FDUSD Briefly Depegs 🚨 What Happened?
Late on April 2, Tron founder @justinsuntron accused First Digital Trust (FDT), the issuer of $FDUSD, of insolvency, claiming it could not fulfill customer redemptions.… pic.twitter.com/UAsJmQlxAe
— Followin (@followin_io) April 3, 2025
Even with the recovery in prices, the market’s confidence was severely shaken and it was already too late to remedy the situation. That left mom-and-pop investors — along with users of the FDUSD stablecoin — in a state of frustration and distrust when it came to their alleged safe havens in the crypto world, particularly because the communication from Binance had been so muddled and delayed. In the days following the panic crash, many associated with the crypto world speculated that the clear lack of immediate transparency had allowed insiders or whales to buy up FDUSD at a severely discounted price.
The Dispute and Allegations: Justin Sun’s Accusations Against FDT
The dispute started when Justin Sun took to Twitter to say that the firm behind $TUSD was not just mismanaging the stablecoin, but wasn’t being honest about its finances, either. Sun said FDT had $456 million in reserves that it had turned into a risky bond portfolio. And he said that was making $TUSD somewhat unstable. Sun is, of course, a major actor in the cryptocurrency space. And it appears that his accusation has somehow made it to federal prosecutors.
The disagreement is mainly about the allegation that FDT mishandled funds related to $TUSD—another stablecoin. It’s said that FDT wasn’t able to manage $TUSD correctly and that left the company in a position where it couldn’t fulfill customer redemption requests. When customers were trying to get their $FDUSD back, the company couldn’t honor that request, and that triggered a sort of run on the bank, where people started panic selling their $FDUSD. That was the first depeg-day for $FDUSD. And it was said that FDT was in a state of insolvency.
To counter the accusations, FDT took to Twitter Spaces to set the record straight. The company insisted that it had done nothing wrong and that $FDUSD was sound, underpinned 1:1 by dollars and not by some suspicious blend of crypto and cash, as had happened with $TUSD. The public remained too riled and skeptical for the reassurance to land, and many began to doubt both FDT and Binance.
Retail Investors and the Fallout
The treatment of retail investors is one of the main flashpoints in the $FDUSD saga.
Following the $FDUSD flash crash, it became clear that many traders and users feel strongly that Binance dropped the ball on timely communication. After all, when prices are crashing, the last thing people want is to be left in the dark about what is going on in the market. There is now a good deal of suspicion that the price crash may have been used as an opportunistic buying moment for either whales or institutional investors, who were then benefited by the subsequent price recovery.
The event has brought up some real worries about how transparent and accountable the big exchanges, like Binance, are, especially at times of crisis. As we get more details about the legal skirmish between FDT and Justin Sun, we’re also starting to ask some very serious questions about the integrity of the stablecoin ecosystem. And with the entire crypto market still reeling from previous stablecoin crises, this incident has once again tested our trust as investors and the industry’s trust overall.
Even though the price of $FDUSD has recovered to about $0.98, the incident’s aftermath is not over. The investors are now questioning the coin’s stability and First Digital Trust’s future. The court proceedings look set to keep $FDUSD’s conversation as its main ongoing narrative. Until more clarity is achieved, the coin’s market participants will not get off the edge of their seats.
Conclusion: A Trust Test for the Crypto Market
The situation with $FDUSD on April 2 has shown that trust in the cryptocurrency market, especially around stablecoins, is very tenuous. Much turbulence in the $FDUSD market has been created by the accusations against FDT made by Justin Sun and by the panic-selling that has followed. Yet, the fact that the price of $FDUSD has recently started to recover once again points to the inherent strengths of the cryptocurrency ecosystem. Nonetheless, the market behavior that we have recently witnessed with $FDUSD raises serious concerns about a lack of transparency and effective communication in the cryptocurrency market.
The stablecoin market is likely to face lasting fallout from the ongoing lawsuit and additional probes into FDT’s management of the $TUSD reserves. As the stock of Terra Luna waits to see whether it will rebound or keep falling, one certainty has emerged: in the crypto space, where everything seems on the verge of blowing up, trust is the single most important quality a project can possess. And any project in the stablecoin space has to be especially trustworthy, because the very essence of a stablecoin is that it is a safe harbor for a trusted cryptocurrency.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
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