FDUSD Depegs 9% After Insolvency Claims, Loses $200M Market Cap

FDUSD, the sixth-largest stablecoin with a market cap of $2.5 billion, experienced a significant depeg to $0.91 yesterday morning. The peg has since recovered, but FDUSD suffered a market cap loss of about $200 million.

The depeg was triggered by tweets from Justin Sun, the founder of Tron. Sun accused First Digital, the issuer of FDUSD, of being "effectively insolvent and unable to fulfill client fund redemptions" for its stablecoin. Sun's tweet included a link to an article detailing Techteryx’s lawsuit against First Digital’s CEO Vincent Chok for alleged mismanagement of the former’s reserves. Techteryx is the issuer of the TrueUSD (TUSD) stablecoin and had previously established First Digital as a fiduciary to manage its reserves. The lawsuit alleges that First Digital had misappropriated $456 million of Techteryx’s monies into “unauthorized trade finance loans.”

First Digital immediately responded to Sun’s allegations, denouncing them as a “smear campaign” and claiming that FDUSD was “completely solvent.” The company also stated that it would “pursue legal action to protect its rights and reputation.” Sun doubled down on his claims in a second tweet, asserting that his statement regarding FDUSD’s insolvency was “a factual statement.”

According to First Digital’s latest February 2025 monthly reserve report, the company’s reserves totaled $2,051,348,188, backing a total issued supply of $2,041,924,819 FDUSD. The collateral backing consisted primarily of US Treasury bills, overnight fixed deposits, and US dollars. However, there remains an element of trust and counterparty risk inherent to stablecoins, as noted by Cork Protocol co-founder Rob Schmitt. Schmitt highlighted that if stablecoins are to underpin the global financial system, there will be a clear demand to hedge against these risks to prevent potential contagion.

FDUSD is widely used on the Binance exchange as a replacement for Binance’s BUSD stablecoin, which was ordered to shut down by the New York Department of Financial Services in February 2023. In response to the recent debacle, Aave has frozen FDUSD depositing and borrowing on its BNB Chain deployment.