The whole story of the $456 million TUSD reserve misappropriation case: How can we trust trust?

The highly publicized case of the misappropriation of $456 million in TUSD reserves, a capital embezzlement case involving multiple jurisdictions including Hong Kong, Dubai, and the Cayman Islands, has recently made key progress.

Author: FinTax

1 Introduction

On November 27, 2025, a press conference titled "Truth Unveiled, Justice Revealed – Global Judicial Proceedings in the TUSD Reserve Asset Case," held in Hong Kong, garnered widespread attention within the industry. Justin Sun, founder of Justin Sun, attended the conference and disclosed key facts and preliminary results regarding the illegal appropriation and misappropriation of TUSD reserve assets, drawing significant attention from the blockchain industry. It is reported that on October 17, the Dubai International Financial Centre Court (DIFC Court) issued an indefinite global asset freeze order against Dubai trade finance company Aria Commodities DMCC, stating that the funds involved "exist to be subject to trial for significant matters," including forged authorizations, breach of fiduciary duties, illegal transfer of reserves, and cross-border money laundering. All relevant individuals and entities are required to fully disclose the flow of funds, or face serious legal consequences.

The highly publicized $456 million TUSD reserve misappropriation case, involving multiple jurisdictions including Hong Kong, Dubai, and the Cayman Islands, has recently made significant progress. However, the legal proceedings are ongoing, and the recovery of funds remains challenging. The loopholes exposed in this case regarding the custody and regulation of crypto assets are undeniable, prompting us to ask: After this incident, how can we trust crypto trusts?

2. The TUSD Incident: The Disappearance of a $456 Million Trust

In late 2020, the Asian consortium Techteryx acquired the operating rights of the TUSD stablecoin from TrueCoin LLC. To ensure a smooth transition, Techteryx entrusted TrueCoin, the original operator, to continue managing TUSD's fiat currency reserves. TrueCoin recommended an offshore fund called Aria Commodities Finance Fund (ACFF) (registered in the Cayman Islands) to Techteryx as its primary investment channel.

However, TrueCoin, as the trustee, abused its management authority in conjunction with the Hong Kong-based trust institution First Digital Trust (FDT). From 2021 to early 2023, FDT CEO Vincent Chok directly approved the six-time secret transfer of up to $456 million in fiat currency reserves to Aria Commodities DMCC, a private trading company in Dubai. This Dubai company was allegedly wholly owned by the wife of the aforementioned ACFF fund investment manager, and thus had a vested interest in the original investment target. To conceal the illicit source of the funds, the parties also forged fund subscription documents, packaging this unauthorized reserve as a related loan to the ACFF fund.

After the funds arrived in Dubai, Aria Commodities DMCC invested them in high-risk or failed projects lacking liquidity, including asphalt manufacturing facilities in the Middle East and coal mining rights in Africa, effectively draining TUSD's fiat currency reserve assets. In 2023, Techteryx began to notice the unusual movement of the reserves, took over operations, and commissioned an independent professional team to conduct a full investigation of FDT, completely exposing the opaque operations.

In January 2024, the crisis fully erupted, and the price of TUSD became severely decoupled, facing the risk of a multi-billion dollar liquidation. At this critical moment of "life or death,"Justin Sun provided a loan of approximately $500 million to Techteryx using his personal funds to help the TUSD project overcome the difficulties, successfully stabilize the price of TUSD, and prevent the DeFi ecosystem from suffering a severe blow.

Subsequently, with the support of Justin Sun, the TUSD project team launched a global legal battle to protect its assets. In the Hong Kong lawsuit, FDT was accused of violating the trust deed and faced claims. In the Dubai lawsuit, Techteryx sought a court ruling that the funds, ultimately flowing into Aria Commodities DMCC, legally belonged to Techteryx. In September 2024, the U.S. SEC publicly characterized TrueCoin's activities as fraudulent. According to the latest news on October 17, 2025, the Dubai International Financial Centre Court issued a groundbreaking ruling, issuing an indefinite global asset freeze order, freezing $456 million worth of global assets belonging to Aria Commodities DMCC and its affiliates.

3 TUSD Event Analysis: Why Did Huge Reserves Flow Out of the Country?

3.1 Trust Structure of TUSD Reserves

The TUSD reserve misappropriation case is a typical example of centralized risk, vividly exposing the vulnerability of traditional financial trust mechanisms in stablecoin reserve management. To understand how funds were illegally misappropriated, we must first understand the trust structure used by TUSD. Stablecoins like TUSD (TrueUSD) maintain a strict 1:1 peg between their issuance and reserve assets, requiring their reserves to be highly liquid assets to ensure readily available redemption by users. The stablecoin issuer (delegator) entrusts the reserves to a trust institution (trustee) for management. The trustee's core responsibility is to act as a custodian of funds, securely managing the assets and making low-risk investments as agreed. This structure establishes asset security on trust in the trustee.

3.2 Causes of Capital Outflow

This misappropriation case was not an isolated mistake by a single entity, but rather the result of a combination of factors, including the project owner's lack of governance and oversight, the trust company and related parties' irregularities, and the inherent institutional fragility of the traditional trust structure itself.

From a project governance perspective, Techteryx's selection and oversight of the reserve fund operator and trustee were inadequate. After Techteryx acquired ownership of TrueCoin's TUSD project, TrueCoin retained operational control. Subsequently, TrueCoin colluded with FDT and other institutions to secretly transfer a large amount of reserves to the Dubai-based private company Aria Commodities DMCC in batches through a series of fraudulent transactions. From an oversight perspective, the project lacked transparent disclosure and independent auditing. While stablecoins should maintain a 1:1 ratio between reserves and circulating supply, in this case, FDT ultimately used various means to invest some of the reserves in high-risk, illiquid areas such as mining, shipping, and manufacturing between 2021 and 2023, instead of traditional low-risk assets such as cash or highly liquid government bonds. Techteryx only realized something was wrong when it discovered that FDT was unable to pay annual interest as agreed and refused to respond to redemption requests. In July 2023, Techteryx officially took over full operational control of TUSD from TrueCoin and launched an independent professional team to conduct a comprehensive investigation of FDT.

From an institutional perspective, the high cost of trust in trust systems puts human nature to the test. The court documents detailing the TUSD reserve misappropriation case amply demonstrate the fragility of the trust mechanism. The allegations allege that FDT and its affiliates "forged authorizations" and "breached fiduciary duties" by using reserve funds for high-risk investments without proper disclosure and informed consent from investors. Vincent Chok, CEO of the Hong Kong-based trust institution FDT, acting as the "gatekeeper" of the funds, abused his trusteeship to approve the illegal transfer of $456 million in reserves to a private company in Dubai, and subsequently received over $15.5 million in secret kickbacks. The parties involved then concealed the misappropriated funds as "related loans" by forging fund subscription documents, constituting clear fraud. The court judgment explicitly stated that the individuals involved "fully knew and conspired to commit fraud and harmful acts." This incident vividly exposes the extremely high moral hazard of centralized managers (trustees) in traditional trust relationships involving human intermediaries. Once a trustee violates their fiduciary duties, their actions will bring disastrous consequences to the entrusted assets. This fully demonstrates that the traditional trust structure is built on trust in human nature, and the coercive effect of technology or rules is limited.

4. Implications and Suggestions

The TUSD incident exposed not a technical problem, but rather the structural vulnerability of excessive trust concentrated in a single institution. For institutions and individuals hoping to operate or invest in the crypto asset space long-term and securely, compliance design is not an additional cost, but a necessary preparation to reduce systemic risk. Truly effective compliance arrangements involve more than just finding a trustworthy custodian; they also include deploying risk isolation mechanisms in advance and timely monitoring.

First, it is necessary to clearly distinguish between the legal ownership and economic benefit rights of assets, and ensure that the reserve assets are legally independent of the project owner and the trusteeship institution itself, so that they will not be included in their balance sheet in the event of bankruptcy, liquidation or internal violations.

Secondly, in terms of fund allocation and key decision-making, a multi-signature arrangement and other checks and balances mechanism should be introduced to prevent any single entity from using core assets without restraint.

Finally, in choosing jurisdiction, priority should be given to jurisdictions with high enforcement efficiency and clear regulatory boundaries. Through professional legal and tax design, it should be ensured that the cross-border flow of funds, command paths and audit chains have clear and traceable legal basis, so as to avoid losing the space for accountability and relief after the fact due to excessive complexity of the structure.

Differences in cross-border regulatory interpretations, frequent adjustments to tax rules, and the unique characteristics of crypto assets make it difficult to balance compliance and long-term stability with a single, universal solution. Therefore, when developing a crypto asset business, it is advisable to seek support from experienced third parties to mitigate subsequent compliance and tax risks.

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