Concerns Raised Over First Digital Trust
Justin Sun recently highlighted serious concerns regarding First Digital Trust (FDT) in a post on the X platform, outlining what he termed the “Seven Sins” that could lead to significant legal repercussions for the firm.
The Seven Sins of FDT
- Breach of Fiduciary Duty: Under Hong Kong’s Trustee Ordinance, trustees must manage client assets with care and loyalty. FDT’s alleged misappropriation of client funds represents a clear violation of this duty, potentially exposing the firm to lawsuits for damages.
- Improper Use of Client Assets: According to the regulations stipulated in the Securities and Futures (Client Money) Rules, custodians are prohibited from using client funds for personal purposes. FDT’s reported transfer of TUSD assets to ARIA DMCC could lead to serious consequences, including penalties, revocation of licenses, or even criminal charges.
- Unauthorized Investment Practices: While FDT functions as a Trust or Company Service Provider, it lacks the necessary licenses from the Securities and Futures Commission (SFC) to perform regulated investment activities. Their engagement with TUSD assets without proper authorization could infringe upon the Securities and Futures Ordinance.
- Theft and Fraud: Allegations indicate that FDT misappropriated funds with fraudulent intent, collaborating with parties such as Aria CFF and Truecoin to obscure the illicit activity. This manipulation involved creating false records and claiming non-existent investments to mislead clients.
- Deceptive Reporting: To mask these unauthorized activities, FDT allegedly submitted falsified statements indicating that TUSD assets were securely invested, which breaches the Securities and Futures Ordinance’s stipulations against fraudulent conduct in trading.
- Anti-Money Laundering Violations: The complex transactions and off-the-books fund transfers undertaken by FDT might contravene anti-money laundering laws, raising flags about the origins of the misappropriated assets.
- Corruption Under the Prevention of Bribery Ordinance: The firm, under the leadership of Vincent Chok, is accused of engaging in corrupt practices by accepting secret commissions from DMCC for the unauthorized transfer of TUSD custodial funds in violation of local anti-corruption laws.
These allegations point to a pattern of misconduct that raises eyebrows in the regulatory environment, putting FDT’s future in jeopardy and potentially impacting clients reliant on their services.
