TRON founder Justin Sun claims he bailed out TUSD, exposing weaknesses in Hong Kong regulation

TRON founder Justin Sun has provided an update on what he describes as a “$500 million fraud” concerning misappropriated TrueUSD (TUSD) reserves, and which he says is being investigated by Web3Bounty.io.

The alleged scheme, which began in 2020 and continued until 2022, involved a web of individuals and entities, including First Digital Trust (FDT), Legacy Trust, and ARIA Commodities, with funds ultimately flowing into financial institutions in Dubai.

Five Individuals, One Platform: A Fraud Story Unfolds

In his statement, Sun credited the newly launched Web3Bounty.io platform for advancing transparency in tracking large-scale fraud across the crypto ecosystem. He named five individuals allegedly involved:

The platform has also identified several entities, including FDT, Legacy Trust, ARIA Commodities DMCC, and ACFF, as pivotal in facilitating the alleged fraud.

According to flow-of-funds data, over $565 million in TUSD fiat reserves was allegedly misappropriated. The funds were routed via FDT and Legacy Trust into accounts controlled by ARIA Commodities DMCC and ACFF, with Finoport and Crossbridge Capital serving as investment managers.

Dubai Banks Implicated; Urgent Action Demanded

At least four Dubai-based banks—Mashreq Bank, ADIB, Emirates NBD, and EFG—are implicated in handling the suspicious funds. Sun appealed to the UAE government, regulators, and the banks involved to take swift action.

“Banks must conduct internal reviews, freeze suspicious inflows immediately, and report them proactively,” urged Sun. He also expressed confidence that the UAE will take firm stands against financial crime in the Web3 era.

Earlier this year, Sun bailed out TUSD after nearly $456 million in reserves became locked in illiquid investments, impacting the stablecoin’s peg to the U.S. dollar.

Techteryx, the current issuer of TUSD, acquired the stablecoin in 2020 and appointed FDT to manage its reserves. However, FDT allegedly diverted the funds to Aria Commodities DMCC, which used them for unauthorized investments in assets like manufacturing plants and renewable energy projects.

When liquidity was needed to meet redemption demands, ACDC and its chairman, ChaeHo Lee, failed to cooperate, leading to a rapid depletion of TUSD reserves and a substantial loss for investors.

Court documents now detail claims of fraudulent misrepresentation and misappropriation of funds, although both FDT and Aria deny any wrongdoing.

TUSD has faced additional challenges, including the collapse of Prime Trust and a U.S. SEC settlement tied to misleading marketing about TUSD’s reserve backing.