Justin Sun spent $456 million to bail out TUSD, alleging that First Digital Trust's reserve fund was misappropriated for investment.

Original Source: CoinDesk

Original Translation: Weilin, PANews

As confirmed by sources familiar with the matter, court documents filed in Hong Kong by the stablecoin issuer revealed that after nearly $500 million in reserve funds became illiquid, Justin Sun intervened to rescue the TrueUSD stablecoin under Techteryx.

Following the acquisition of TrueUSD from TrueCoin in December 2020, Techteryx appointed the Hong Kong-based trustee First Digital Trust (FDT) to manage its stablecoin reserves.

According to documents prepared by the U.S. law firm Cahill Gordon & Reindel, FDT had been instructed to invest the stablecoin reserves in the Cayman Islands-registered Aria Commodity Finance Fund (Aria CFF). However, the court documents state that approximately $456 million was improperly diverted to an unauthorized standalone entity, Aria Commodities DMCC, based in Dubai.

The court documents reveal that Matthew Brittain controls Aria Commodity Finance Fund (Aria CFF) through Aria Capital Management Ltd, while Cecilia Brittain is the sole shareholder of the standalone operational entity Aria Commodities DMCC based in Dubai.

However, the email signature from Aria's Matthew Brittan uses an address in Dubai.

Court documents state that Cecilia is Matthew's wife.

According to Matthew Brittain's description in an email sent to CoinDesk, ARIA DMCC is involved in trade financing, asset development, and commodity trading, while ARIA CFF provides financing services to commodity traders, including ARIA DMCC and other third parties.

An audit report issued by Moore CPA Limited shows that as of November 2024, FDT was managing $501 million in the TrueUSD reserve.

The Hong Kong court documents also point out that First Digital CEO Vincent Chok is accused of transferring around $15.5 million in undisclosed commissions to an entity named "Glass Door" and additionally structurally providing approximately $15 million in unauthorized trade financing loans from FDT to Aria DMCC, which were later retrospectively misclassified as legitimate fund investments. The plaintiff alleges that these actions constitute fraudulent misrepresentations and misappropriation of funds.

"The funds transferred to Aria DMCC constitute blatant misappropriation and money laundering," the complaint states. "These operations were carried out without the knowledge, authorization, and approval of the plaintiff."

As of the time of writing, these allegations have not been adjudicated in court.

Aria DMCC invests funds in various global projects, which it describes as assets with relatively low liquidity, such as manufacturing plants, mining operations, shipping vessels, port infrastructure, and renewable energy projects.

Court documents state that when Techteryx attempted to redeem its investment from Aria CFF in mid-2022 to early 2023, it was almost unable to recover the funds. Aria-related entities are accused of failing to make timely payments and honor redemption requests.

Subsequently, in July 2023, Techteryx took full control of TUSD operations, terminating TrueCoin's involvement. As part of the transitional arrangements following the sale in December 2020, TrueCoin had continued to oversee the day-to-day operations of TUSD.

According to court documents, Justin Sun intervened during this period to provide emergency liquidity support to TUSD, which was structured as a loan.

The court documents also state that despite the stablecoin issuer being out of funds, the Techteryx team still sequestered 400 million TUSD to ensure that retail users could still redeem normally, with no impact on token holders.

First Digital States It Followed Techteryx's Instructions

In response to CoinDesk's request for comment, First Digital's CEO, Chok, emphatically denied any wrongdoing on their part or involvement in any fraudulent scheme.

Chok told CoinDesk that First Digital Trust acted strictly as a trustee intermediary, executing transactions in strict accordance with the instructions provided by Techteryx and its representatives. He emphasized that the company was not responsible for independently assessing or advising on these investment decisions.

In an email to CoinDesk, Chok stated, "To our knowledge, a key hurdle for ARIA in complying with Techteryx's request for early redemption of funds was their AML and KYC concerns regarding transactions between TrueCoin and Techteryx, particularly with respect to the true identity of Techteryx's ultimate beneficial owner." He added that he believed that none of the parties involved in this case considered Aria lacking in liquidity.

"We have not yet had the opportunity to fully defend ourselves," Chok also said in the email, "As legal and arbitration proceedings progress, we will vigorously address these issues."

Matthew Brittain of Aria Group told CoinDesk that he "completely refutes the allegations made by Techteryx against ARIA DMCC and any related entities" and added that "many false accusations have been made in the court proceedings."

Brittain stated that Techteryx was fully informed about the relevant investment term commitments, which were clearly outlined in the contracts agreed upon by investors when investing in ARIA CFF and explicitly stated in the offering memorandum.

Brittain also addressed Chok's concerns about Techteryx's beneficial ownership, pointing out that this issue has been covered in The Wall Street Journal.

In the Hong Kong court summons, Li Jinmei (originally Li Jinmei) is listed as the Ultimate Beneficial Owner of Techteryx. A spokesperson for Techteryx confirmed that this person is not the former UBO Jennifer Yiyang mentioned in some media reports, although there has been some confusion in the media.

"The subscriber has not yet addressed these issues," Brittain added, referring to the concerns about beneficial ownership.

Prime Trust Collapse and SEC Settlement Further Complicate Matters

Meanwhile, at the same time, TUSD's troubles continue to escalate, manifesting in a bank partner's collapse and regulatory scrutiny in the United States.

In mid-2023, Prime Trust, an independent crypto custody institution in Nevada with no direct connection to this case, was taken over by state regulators. TrueUSD had used this institution as a fiat on/off ramp partner.

State regulators alleged that Prime Trust improperly used client funds to meet withdrawal requests, sparking serious concerns about its financial stability.

Court documents in Nevada showed that Prime Trust owed approximately $85 million in fiat obligations while having only around $3 million in available funds at the time.

This was not the last challenge faced by the stablecoin issuer.

In September 2024, TrueCoin and TrustToken (the previous owners of the stablecoin before Techteryx took over) reached a settlement with the U.S. Securities and Exchange Commission (SEC) after being accused of misleadingly advertising TrueUSD as "fully-backed by the U.S. dollar" while secretly investing reserve funds in high-risk offshore funds.

Although not admitting to any wrongdoing and without disclosing details of overseas investments with Aria-related entities, TrueCoin and TrustToken agreed to pay a total of just over $500,000 in civil penalties and return ill-gotten gains to settle the charges of fraud and illegal securities issuance.

Brittain from Aria stated that investing stablecoin reserve funds in Aria from the beginning was not a prudent decision.

In an email, he wrote, "ARIA CFF never marketed its investment strategy as highly liquid or suitable for stablecoin reserves."

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