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Highlights
- Justin Sun steps in with emergency funding to rescue TUSD from a $456M liquidity crisis, ensuring stability for users.
- TUSD’s $456M crisis exposed mismanagement, but Justin Sun’s intervention kept it stable.
- Legal battles and a collapsing custodian pushed TUSD to the brink, but Sun’s support kept the peg intact.
Justin Sun, the founder of Tron, stepped in to provide crucial financial support to TrueUSD (TUSD) following a $456 million reserve crisis that left the stablecoin’s reserves in a state of limbo.
According to court documents filed in Hong Kong, a series of financial missteps and unauthorized investments by TUSD’s fiduciary led to a significant liquidity shortage. Sun’s involvement helped prevent the situation from escalating further, ensuring TUSD’s stability during a challenging period for the stablecoin.
TUSD Faces $456 Million Liquidity Crisis
Techteryx, which acquired TrueUSD in December 2020, faced a severe liquidity crisis when it discovered that around $456 million of its stablecoin reserves were stuck in illiquid investments. These investments were made by First Digital Trust (FDT), an independent fiduciary based in Hong Kong, which TDT had appointed to manage TUSD funds.
Instead of sinking the agreed funds into the Aria Commodity Finance Fund (Aria CFF), FDT is accused of channeling funds to Aria Commodities DMCC which is a company different from Aria CFF but based in Dubai.
Aria Commodities DMCC offered trade finance, commodity trading and infrastructure development services wherein it invested in assets which were mainly non-standard. This caused problems when entry was sought by Techteryx to ‘exchange’ the investments, as the money was not ‘redeemed’. Court documents further reveal that even though Techteryx attempted to withdraw the cash several times, Aria DMCC hardly remunerated it.
Justin Sun Provides Emergency Financial Support
When funding reserves in TUSD became unavailable, the stability of the stablecoin and its link to the US dollar came under threat. To mitigate the effects of the situation regarding liquidation, Tron Founder Justin Sun injected capital into TUSD to prevent further collapse.
His financial intervention allowed for the continuation of retail redemptions and averted further disruption of TUSD users. The support was in the form of a loan and for this purpose, Techteryx put aside 400 million TUSD to help in supporting the confidence of the users or customers. In the statement explaining the reason behind such a decision, Sun underlined the necessity to preserve users’ confidence.
“I stepped in to help stabilize TUSD because I believe in the importance of maintaining trust in stablecoins and ensuring the security of their reserves.”
Tron founder Sun’s involvement came amid growing concerns about the stability of the stablecoin, with many wondering whether TUSD could weather the financial turmoil. Techteryx’s decision to isolate the troubled reserves helped ensure that the broader stablecoin ecosystem was not adversely affected, despite the underlying issues.
Legal Disputes Over Mismanagement and Fraudulent Practices
Court documents also reveal fraud, misrepresentation, and embezzlement, where it is averred that unauthorized trade finance loans were advanced from FDT to Aria DMCC. These loans were later misrepresented to the unsuspecting investors as real investment projects.
The allegations revolve around the management of the TUSD reserves by FDT under the leadership of its Chief Executive Vincent Chok. Chok, however, has refuted these allegations asserting that FDT never undertook an independent evaluation of the investments and was acted based on the directives of Techteryx.
On the other hand, Aria Group member, Matthew Brittain has also denied Techteryx’s allegations, noting that all the transactions were done in a transparent manner and as agreed. Brittain also questioned some ambiguous issues about the ownership of Techteryx which has faced legal and financial challenges in the recent past.
Challenges Faced by TUSD Amid Banking and Regulatory Issues
TUSD also faced more problems due to the failure of Prime Trust, an American-based cryptocurrency custodian that partnered with TUSD.
Frayed by scandals that accused it of embezzling customer funds just the following year, Prime Trust entered receivership, which cast doubts about TUSD’s fiat ramps.
Furthermore, the SEC entered into a cease-and-desist settlement with the previous owners of TUSD, TrueCoin, and TrustToken, for using false and misleading statements that TUSD is dollar-backed while investing in dodgy offshore funds.
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