Sun Yuchen: Why did Techteryx get scammed for 500 million USD?

This interview is a follow-up to the media briefing held by Justin Sun on November 27 in Hong Kong regarding the TrueUSD (TUSD) judicial event, focusing on the incident of the misappropriation of the 500 million USD reserve funds. The conversation involves the Hong Kong trust company First Digital Trust (FDT), Dubai-related entity Aria, and its controllers. During the interview, Justin Sun's side introduced details about how funds were improperly transferred from the Hong Kong trust account to an affiliated private company, forged documents, double bookkeeping, and the kickback payment chain. He believes there are regulatory loopholes in the Hong Kong trust system, the case is being processed slowly in Hong Kong, and explained why the Dubai DIFC court was able to quickly issue a global freeze order within five months. The content also covers the current status of fund tracking, the probability of recovery, legal strategies, and the warning significance for the industry.

Previously, Sun Yuchen accused FDT of unauthorized transfer of nearly $500 million in TUSD reserves to overseas private companies during a briefing, and of forging transaction documents to cover up the transfer. He stated that the funds should have been stored in a licensed fund in the Cayman Islands, but were instead directed into unredeemable offshore structures like Aria Commodities DMCC (Aria DMCC), reflecting serious regulatory loopholes in Hong Kong's trust and TCSP systems, allowing trust companies to transfer client assets without verifying the investment entities.

He emphasized that the Dubai Digital Economy Court has issued a global freezing order due to “significant disputes”, bringing external pressure to the case and highlighting the weaknesses in Hong Kong's custody regulation. Sun Yuchen denied FDT's claim about “acting on instructions”, stating that he has evidence of their forged documents, and criticized FDT for trying to prevent him from disclosing the facts with an injunction. He expects more developments in the incident by the end of this year.

In this regard, FDT issued an official statement, pointing out that the aforementioned content constitutes a false statement and has defamed the company and its management. FDT stated that it has completed systematic evidence collection and preservation regarding Sun Yuchen's related social media content, and formally reserves the right to pursue all legal liabilities in accordance with the law.

Disclaimer: The content of this article only represents the personal views of the interviewee and does not represent Wu's views.

Overview of Background Events: TUSD Funding Chain, Risks in the Operation of Hong Kong Trust Accounts

Colin: Let me briefly explain my understanding of this event. Essentially, Techteryx handed over approximately 500 million USD in reserves of the stablecoin TUSD to FDT for management by this Hong Kong trust company; then they transferred this money to a fund management company in Dubai, which subsequently transferred the funds to another company controlled by the wife of the person in charge, Aria DMCC.

Steve: There are no fund management companies in Dubai, FDT directly transferred the money to the private company controlled by Aria's wife's holdings.

Colin: So your current situation is that you hope Aria DMCC can retrieve this money, but the other party refuses to return it. Therefore, you applied to freeze these funds, and they have all been frozen now. Next, you will have to wait for the Dubai court's ruling to see whether this money should be returned to you or how it will be handled.

Justin: It's a bit more complicated than what you mentioned, so let me explain briefly, and Steve can add more. The funds of TUSD are entrusted to FDT for management, but the trust system in Hong Kong is not as people imagine; it is quite different from the trust systems in Europe and America. The use of the term “trust” in Hong Kong can be misleading; I personally believe that the Hong Kong trust system is essentially a mechanism for opening bank accounts. Many large banks in Hong Kong do not open bank accounts for people due to risk control reasons, so trust companies have emerged. Trust companies open accounts in banks and then allow people to open trust accounts with them. This way, trust companies act like brokers to help people set up trust accounts, allowing them to freely use the trust accounts for remittances and transfers. Techteryx also opened a trust account in this way and transferred funds to the trust company.

But this case reflects the key points that the industry needs to pay attention to. Trust companies in Hong Kong are essentially brokers. For example, when you open an account on Robinhood, it is actually placing orders through Interactive Broker. If the former is a counterfeit, it has not helped you place orders at all; the money you deposit with it is used to create a simulated account for you to trade, but the front-end information you see is actually false information, and the money has long been moved away by it. The key is that when you first deposit funds into its account, it is already “decoupled.” Trust companies in Hong Kong originally play the role of brokers, but under Hong Kong law, they are the holders of trust assets, which means they can directly transfer the money to their designated accounts. Moreover, it should be noted that in this case, it was not even the Aria Fund that transferred the TUSD assets, but a private company that does not have fund qualifications.

FDT related transfer documents for fraud in conjunction with Aria

Colin: But there is a core issue here, which is that FDT emphasizes that this money was transferred out at the request of the manager of TUSD — Techteryx.

Justin: No. First of all, Techteryx has never asked FDT to transfer money to Aria DMCC. The documents disclosed by Aria are all fake documents created after they transferred the money, and now they are exposed. It has also been clearly stated in the court documents that these are all backdated, created documents.

Moreover, Techteryx has also made it clear to FDT that for any transfer, funds must only be sent to a licensed fund in the Cayman Islands, named Aria Commodity Finance Fund (ACFF), and it is absolutely not allowed to transfer to personal accounts. This is a clear regulation that must not be crossed under any circumstances. Here, I would like to emphasize two points: first, they created false transfer documents after the matter was exposed; second, even in the forged documents claiming that the funds were transferred to a certain fund, the actual recipient of the funds was not a fund at all, but a private entity without any qualifications.

Hong Kong litigation cycles are long: cross-jurisdictional fraud cases generally take 3–5 years.

Colin: The lawsuit against FDT in Hong Kong has been going on for quite a while. If you have clear evidence that he forged those documents, wouldn't the court be able to make a judgment on this quite easily?

Steve: I would like to add that the average court processing cycle for fraud cases in Hong Kong is generally quite long. It usually takes 3 to 5 years, especially for cross-border cases involving multiple jurisdictions like this one, where 3 to 5 years is almost the average cycle. We should now be entering the second year, and next year we will enter the third year. Currently, the schedules for related cases have basically been set for next year.

Investigation direction: whether FDT and Aria are profitable, rebate chain, fraud evidence

Colin: So do you have any evidence showing that FDT and Aria DMCC in Dubai did this and what benefits they gained?

Justin: Yes. Although we do not yet have all the evidence, as we are still investigating, it has been clearly identified that after the payment was made that day, Aria paid a kickback of 14 million USD to a fund named Glass Door. This fund is a secret entity jointly controlled by Yai, the head of Finaport, and FDT.

Of course, I personally believe that paying a kickback of 14 million USD out of 400 million USD is not everything, but I personally think that this kickback of 14 million USD is already enough to demonstrate its crime, and the amount of 14 million USD is extremely huge. Therefore, I also mentioned at this year's press conference that I personally believe this is important evidence.

Over 400 million funds actually flowed into investments resembling the fraudulent model of FTX.

Colin: So after this money is transferred over, which specific fields are the more than 400 million USD currently invested in? Do you have any relevant data? Have you already grasped it?

Steve: They actually kept two sets of books, which is equivalent to cooking the books on paper. On one hand, they claimed on the books that funds were invested in some very strange and essentially fictitious projects mentioned at the press conference; this is the first set of books. However, these so-called “invested here, invested there” projects have no corresponding bank statements to prove that the funds actually reached those places. The actual fund flow shown by the bank statements has nothing to do with these projects.

In other words, they were committing fraud on two levels: the project itself was a fictitious so-called investment scheme, while real funds were being diverted elsewhere, including tens of millions entering the private accounts of that British individual, among other incidents. From these two aspects, the whole affair resembles “Mission: Impossible”; it has been a complete fabrication from start to finish.

Justin: Personally, I don't think it is necessary to deliberately elevate it to the level of “Mission: Impossible”; FTX also had a similar model of deception back in the day. When reviewing the FTX scam, people often ask: Where did FTX's money actually go? FTX also played the game of double books. If you are an outsider, you might get confused by their superficial statements — they said that the users' funds were all in tokens like Serum, MAPS, and FTT.

He might say, for example, that he has taken $10 billion from users, but the market value of the tokens he holds, such as Serum, MAPS, and FTT, exceeds $10 billion, so that money actually went to these places. If the judge or law enforcement doesn't understand, they might be deceived by this statement, thinking the numbers match, as if FTX is fine.

But a judge who understands a layer deeper would further question: how was this 10 billion dollars misappropriated? It’s important to see who Sam specifically transferred the money to. For example, he claims it is related to the MAPS Token, but essentially, he did not actually send this money to the MAPS project party. Further tracking would reveal that the money was actually sent to companies like Genesis Block, Anthropic, and Robinhood.

So in my opinion, what is happening here with Aria is also a “two accounts” model. Of course, we need to investigate both accounts, as they are currently frozen assets.

Dubai freeze order: The first batch of involved accounts has been frozen, tracking into the second and third layer accounts.

Colin: Hasn't Dubai already frozen this income? What exactly is frozen?

Justin: We have obtained a freeze order. After obtaining this freeze order, we need to go to different banks and different institutions to execute it, and then freeze different companies, different equities, and different funds.

Colin: What has been frozen at the moment?

Steve: The first layer of bank accounts involved in the case has been completely frozen. Most of these amounts were quickly “washed” into other accounts in the second and third layers. Therefore, our current application and execution of a global freeze order is to further investigate which peripheral accounts in the second layer this money flowed into after the first layer accounts were frozen, and then submit freeze applications for these accounts layer by layer, continuing the tracking process. This will be a relatively long process.

Colin: So the funds that have been recovered so far should be relatively limited, as most of the money has already been dispersed to different accounts. Based on your current investigation, how much of the 400 million USD is approximately left now? How much do you expect to recover in the end?

Steve: I think because this involves fiat currency issues, hiding 500 million USD in fiat is very difficult, unless it is really burned out. So essentially, this is a matter of time, and we believe there is still a chance to recover most of it.

Colin: But didn't you say they already invested the money into some messy projects?

Steve: In fact, the money never went to those projects; they were just fabricated on the books.

Colin: Fake?

Justin: Yes, it's just like how FTX back in the day claimed the funds were for buying MAPS Token and Serum Token.

Steve: Yes, it doesn't matter at all. They claim that the funds are directed towards those projects, but from the bank statements, the true destination of the funds is completely unrelated to the so-called investment projects.

Justin: It's all been transferred to individuals.

FDT Role and Rebate Link Exposure: Why Funds are Directed to Private Companies Instead of Compliant Funds

Colin: There is a question, which is that FDT still has certain legal responsibilities, but this freeze order in Dubai is not related to FDT, right? Is it true that FDT's main lawsuit is still in Hong Kong?

Steve: That's right. Because one important standpoint of the judge is that, like FDT, transferring such a large sum of funds to that company in Dubai without any legitimate authorization procedures is a serious issue that needs to be examined carefully. The DIFC in Dubai is not the main court; the main court is in Hong Kong. The freezing action was taken based on reviewing the evidence, believing that there are significant hidden issues that need to be thoroughly examined by the Hong Kong court. Therefore, on this basis, all assets involved in the case were directly frozen to prevent further asset loss. This is the reasoning behind it. The evidence listed and the opinions expressed in it are quite serious matters.

Justin: The judge has recognized that this is a complete set of fraudulent activities. I mentioned today that the court's ruling on the freezing order has already stated the kickback chain, which includes the part paid to FDT, so FDT is one of the sources of the entire incident.

Steve: Yes, the reason this started with FDT is that the rebate channel requires their cooperation for the system to operate.

Justin: The rebate comes from this link.

Colin: Did FDT also participate in the overall court litigation? Why didn't they participate? Wasn't something sent to them?

Steve: No. This freeze order is directly aimed at that private company in Dubai, which is the most straightforward.

Colin: Understood. But did that private company participate?

Steve: Yes. That private company is in collusion with FDT; they jointly transferred the money. The court documents state clearly that they chose this path because it allowed them to more smoothly collect tens of millions of dollars in secret kickbacks.

Justin: According to the document they drafted, all funds should be transferred to ACFF. Leaving aside whether ACFF is a suitable investment, it is at least a fund regulated by the Cayman Islands Monetary Authority. However, internally — one could say among a group of embezzlers — there has actually been a debate. The other party's argument is that since everyone is embezzling and funds can be transferred freely, why bother going through a regulated fund? Because if they go through a compliant fund, the speed of privately dividing the spoils and kickbacks would slow down, which is not convenient for them.

According to court records, at that time Vincent Chok insisted that the funds must be transferred to an account controlled by Matthew Brittain, while Matthew's opinion was that even if they were to “steal,” at least the money should be “put in a legitimate institution like Minsheng Bank” to appear more compliant. But Vincent meant that since they were going to steal, they might as well “deposit it in a township enterprise,” as that would make kickbacks easier to operate. Why? Because operating kickbacks through private company accounts is much easier and more discreet than through regulated funds. These details are all recorded in the court documents.

Colin: So the assets you are involved with this time are basically fiat currency, right? There isn't any crypto?

Justin / Steve: Yes, they are all fiat currencies sent over.

Colin: And this freezing order is the first global freezing order issued by the Dubai Digital Court, right?

Justin: Yes, it's the first global freeze order.

Colin: This should be considered a quite symbolic event. Subsequently, you can also use this freeze order to freeze all related assets, as long as they are related to this 500 million USD, right?

Justin: Yes, everything can be frozen.

Colin: This should be considered a quite significant victory for you. The freeze order should have legal effect on banks worldwide, and institutions like HSBC will implement it.

Justin: That's right. Moreover, we believe that this is not just an issue of enforcing a freeze order; more importantly, this is the first court ruling that makes a key determination regarding the underlying facts confirming their fraud.

Dubai freeze order process: only 5 months from filing to implementation.

Colin: How long did the entire process take from when you filed the lawsuit to the final freezing order being issued over here in Dubai?

Steve: It took about 5 months, roughly 5 months in total.

Colin: Well, this speed is indeed very fast. So why is it so slow over in Hong Kong? The progress in Dubai is obviously much faster.

Steve: We feel the same way. The judge handling the case in Dubai has a very high reputation and is well-regarded in the local judicial community. Therefore, the seriousness of his review and the strength of his arguments are both very high.

Justin: The entire ruling document has more than 400 sections and over 100 pages, very detailed.

Colin: I have a question: since you sued FDT in Hong Kong a few years ago, why did you only file a lawsuit in Dubai five months ago?

Steve: The situation is that this is actually a stroke of luck. Because in the DIFC — which is the Dubai International Financial Centre — there wasn’t a mechanism like this before. The DMCC involved is a private company in Dubai, but our initial lawsuit was filed in Hong Kong. It was only in the last year or two that the DIFC made it clear that it could support ongoing litigation in foreign jurisdictions and issue freezing orders, and subsequently formalized this measure in their new regulations. When an applicant already has an ongoing case in another jurisdiction (for example, Hong Kong), and the court deems the evidence and arguments sufficient, the DIFC courts can now assist in taking protective measures, including global freezing orders.

This mechanism has only been truly established in recent years, so upon learning that this new mechanism could be applied, we immediately took action.

Justin: At the same time, I also think that the pace of progress in Hong Kong is indeed too slow, which is one of the important reasons why scammers can operate rampantly. They are precisely taking advantage of the system's slowness and the difficulty of cross-border enforcement.