The crypto market experienced renewed instability on April 2 after Justin Sun publicly disclosed that First Digital Trust (FDT), the entity tied to the fiat-backed stablecoin FDUSD, is facing insolvency. According to Sun, FDT, based in Hong Kong, is no longer able to fulfill its financial obligations due to what he described as serious lapses in internal control and oversight within the city’s trust licensing framework.
Sun urged authorities to take immediate action, warning that Hong Kong’s position as a leading global financial hub could be severely impacted. His statement pointed to a need for tighter regulation to prevent similar failures from threatening investor confidence in the future.
FDUSD, which maintains full backing in U.S. dollars and is supported by Binance, dropped below its one-dollar peg following the announcement. The stablecoin briefly slipped to 91 cents before recovering to around 97 cents. With a market capitalization of roughly $2.54 billion and a daily volume of $6.9 billion, the price movement triggered swift reactions across the community.
Public Outcry Grows as Whales Allegedly Exploit the Dip
The situation quickly drew attention on social media, with mixed reactions from market participants. X user @xtony1314 (逍遥XTony) commented that Binance has sufficient capital to absorb a total loss in FDUSD, downplaying the event’s severity. He added that he took advantage of the drop by purchasing $200,000 of stablecoin during the dip.
However, many retail investors expressed frustration over how the situation was handled. X user @yuyue_chris (uyue) accused Binance of prioritizing large investors by assuring them that their funds would be protected while smaller investors were left to take losses. He alleged that BNB-affiliated whales took the opportunity to arbitrage during FDUSD’s brief depeg, intensifying concerns about fairness and transparency.
His criticism was directed at Binance-linked figures, including @sisibinance, @yaya_bnb, and @heyibinance, bringing more attention to how Binance handled communication and internal safeguards during the incident.
Industry Responses and Legal Developments Unfold
In response to the unfolding issue, Binance co-founder Yi He addressed the community to reassure users. She stated that Binance actively monitors the situation and emphasized that user funds remain secure on the platform.
Yi He also revealed that Justin Sun has initiated legal action against TrueUSD (TUSD), another stablecoin project valued at approximately $495 million with a daily trading volume of around $56 million. While Binance is not directly involved in the dispute with FDT or TUSD, the platform has committed to following the matter closely to protect users and uphold market stability.
The incident has sparked broader discussions across the crypto sector regarding the responsibilities of exchanges, transparency in custody arrangements, and the risks involved with trust-based stablecoins.
Conclusion
The FDUSD depeg has ignited fresh debate around how centralized exchanges and custodial entities manage crises. As regulatory responses take shape, the crypto industry faces ongoing questions about transparency, risk, and the treatment of retail participants in volatile markets.
