In a dramatic turn of events, Justin Sun, the founder of Tron, intervened to bail out TrueUSD (TUSD), a stablecoin issued by Techteryx, after a staggering $456 million in reserves became trapped in an unauthorized investment scheme. This revelation comes from recent court filings in Hong Kong, shedding light on the operational turmoil within the stablecoin’s management.
Background on TrueUSD and Techteryx
Techteryx acquired TrueUSD from TrueCoin in December 2020 and designated First Digital Trust (FDT) as the custodian for its stablecoin reserves. FDT was instructed to invest these reserves in the Aria Commodity Finance Fund (Aria CFF), a legitimate entity registered in the Cayman Islands. However, allegations surfaced that nearly half a billion dollars were misappropriated into Aria Commodities DMCC, a separate and unauthorized Dubai-based firm.
The Misallocation of Funds
Court documents reveal that Matthew Brittain controls Aria CFF through Aria Capital Management Ltd, while his wife, Cecilia Brittain, is the sole shareholder of Aria Commodities DMCC. This misallocation of funds has raised serious concerns about transparency and governance within the investment framework. According to communications from Matthew Brittain, the two entities are linked; Aria DMCC focuses on trade finance and commodity trading, while Aria CFF finances commodity traders, including its own Dubai counterpart.
Financial Management and Allegations of Fraud
Attestations from Moore CPA Limited indicate that FDT managed $501 million of TrueUSD’s reserves by November 2024. However, the court filings also allege that Vincent Chok, CEO of First Digital, directed approximately $15.5 million in undisclosed commissions to a mysterious entity named “Glass Door” and facilitated around $15 million in unauthorized loans from FDT to Aria DMCC. These actions have been characterized by plaintiffs as fraudulent misrepresentation and misappropriation.
A statement from the claim reads: “The remittances to Aria DMCC were blatant misappropriation and money laundering, made without the knowledge, authorization, or approval of the Plaintiff.”
Difficulties in Fund Recovery
Techteryx faced challenges while attempting to redeem its investments from Aria CFF between mid-2022 and early 2023. The court documents suggest that Aria entities defaulted on payments and failed to fulfill redemption requests, plunging TrueUSD into a liquidity crisis. In response, Techteryx took full operational control of TUSD in July 2023, ending TrueCoin’s involvement.
Emergency Measures by Justin Sun
As the situation escalated, Justin Sun provided crucial emergency liquidity support structured as a loan. Techteryx quarantined $400 million in TUSD to ensure retail redemptions could continue, despite the issuer facing severe financial constraints. This move was aimed at safeguarding the interests of token holders during a tumultuous period.
First Digital’s Defense and Claims of Compliance
In light of the ongoing legal proceedings, Vincent Chok, CEO of First Digital, has vehemently denied any wrongdoing. He asserts that FDT acted solely as a fiduciary intermediary, executing transactions based on Techteryx’s explicit instructions without independent evaluation. He emphasized that concerns regarding the identity of Techteryx’s ultimate beneficial owner played a significant role in the challenges faced in redeeming funds.
Matthew Brittain of Aria Group has also rejected Techteryx’s claims, insisting that the contractual obligations were clear and that Techteryx was well-informed about the investment terms. He further highlighted the complexity surrounding the ownership structure of Techteryx, identifying Li Jinmei as the ultimate beneficial owner, contrasting with previous media reports.
Navigating Regulatory Challenges and Banking Instability
The difficulties faced by TUSD were compounded by external factors, such as the collapse of Prime Trust, a crypto custodian that had been instrumental in managing TrueUSD’s fiat transactions. In mid-2023, Prime Trust fell into receivership due to allegations of misusing customer funds. This financial instability raised serious questions about TrueUSD’s operational viability.
Moreover, in September 2024, TrueCoin and TrustToken reached a settlement with the SEC over allegations of falsely marketing TrueUSD as fully dollar-backed while secretly investing reserves in high-risk offshore funds. Both parties agreed to pay civil penalties of over $500,000 without admitting wrongdoing.
Conclusion: Reevaluating Investment Strategies
Matthew Brittain commented that investing in Aria CFF was not suitable for a stablecoin’s reserves, stressing that the fund never claimed to offer high liquidity. As the legal and regulatory landscape continues to evolve, the future of TrueUSD and its management strategies remains uncertain, highlighting the critical need for transparency and accountability in the cryptocurrency sector.
