Justin Sun Calls for Reform of Hong Kong’s Trust Laws After TUSD Misappropriation Allegations

HONG KONG—It was a battle of stablecoin issuers Thursday afternoon in Hong Kong, with Justin Sun, the founder of the Tron blockchain, and First Digital Trust (FDT), a Hong Kong-based fiduciary, holding press conferences over allegations of fund misappropriation involving Techteryx’s TrueUSD reserves.

Sun doubled down on claims that TrueUSD’s reserves were “misappropriated by a few bad actors,” leading to him needing to quietly bail out the stablecoin.

Sun pointed a finger the Hong Kong regulatory framework surrounding trusts, arguing at the press conference that loopholes and loose rules allowed the alleged misappropriation to occur.

“This situation highlights a serious challenge to the integrity of the financial system that must be addressed,” he said. “I found it hard to believe the scale of fraud orchestrated by a long list of licensed intermediaries.”

Sun even said that for the time being, Hong Kong trust companies should be avoided entirely, and urged regulators to take decisive action to safeguard the city’s global financial reputation.

For that case, Sun might have an ally in the shape of Hong Kong lawmaker Johnny Ng — called the city’s Web3 politician. He released a statement saying that he’s aware of multiple reports this year of alleged fraud exploiting trust companies, and acknowledged that local regulation needs to be improved.

After Sun’s press conference, First Digital Trust held its own event on X, with CEO Vincent Chok saying Sun had yet to produce “one solid piece of evidence” to back up his claims.

FDT followed its fiduciary duties, acted in clients’ best interests, complied with instructions from Sun and his nominees, which were signed off by Techteryx directors, and noted that the company is subject to third-party audits, Chok said.

Chok, however, acknowledged he was previously unaware of the familial connection between Aria CFF and Aria DMCC — the funds where TUSD’s reserves are held up.

In a complaint to the Department of Justice, Techteryx noted that Aria CFF, the fund it said is authorized to hold TrueUSD’s reserves is managed by Matthew Brittain. Aria DMCC, which Techteryx said is unauthorized, is controlled by his spouse, Cecilia Brittain.

Chok said FDT is working to recover funds, but know-your-customer (KYC) and anti-money laundering (AML) issues involving the ultimate beneficial owner of Techteryx are apparently holding things up.

He also rejected Sun’s claims in a post on X that First Digital Trust is unable to fulfill redemption obligations of its FDUSD stablecoin. The token is still very much solvent, Chok said.

FDT said it plans to pursue legal action over Sun’s claims.

Earlier, the company posted examples of on-chain data showing redemptions going through.