First Digital Trust Sues Justin Sun Over Insolvency Claims

First Digital Trust has taken legal action against Justin Sun, the founder of Tron, by filing a defamation claim in response to Sun's public allegations that the Hong Kong-based custodian is insolvent. The dispute began on April 3 when Sun made the claim on the social media platform X, which led to a brief de-pegging of First Digital's FDUSD stablecoin. Although the stablecoin has since recovered, the damage to First Digital's reputation has prompted the company to seek legal recourse.

The writ of summons, filed late last week, requests the Hong Kong High Court to issue an injunction restraining Sun from making further statements on the matter. It also seeks an injunction requiring Sun to publish retractions of his previous statements. Additionally, the claim asks for an award for damages for "unlawful interference with the Plaintiff's contractual and business relationships" and "causing damage to the Plaintiff's business," although the specific amount is not mentioned.

Since making his initial claim, Sun has continued to assert that First Digital is insolvent, holding a press conference in Hong Kong to allege fraud and call for regulatory reforms. First Digital, on the other hand, has provided evidence of successful redemptions to counter Sun's claims. An initial court hearing date has not yet been set, and Sun has not filed a response to the claim. However, he has posted on X that he "welcomes any legal process."

This legal battle highlights the potential consequences of public accusations in the financial sector, particularly in the cryptocurrency industry. The outcome of this case could set a precedent for how similar disputes are handled in the future, underscoring the importance of accurate information and the risks associated with spreading false or misleading statements. Industry participants and regulators will be closely watching the developments in this case, as it may have broader implications for the cryptocurrency market.