Does Justin Sun Have $1.93B to Back His TrueUSD Stablecoin Supply?

LUCKNOW (CoinChapter.com) — Justin Sun-backed stablecoin TrueUSD (TUSD) is facing difficulties proving it has full collateral backing its $1.93 billion token supply.

According to blockchain data provider LedgerLens, TrueUSD displays a real-time reserve balance dashboard on its official website. During the last reporting period, this dashboard showed the system received API errors and could not retrieve USD valuations for the collateral assets.  

LedgerLens said, “Commonly, over the historical operation of the system, the Balances ripcord is triggered by temporary imbalances seen in normal operations. However, the Balances ripcord can also be triggered due to an imbalance of liabilities and corresponding assets.”

TrueUSD’s Security Concerns Shake Investor Confidence

This issue highlights ongoing stability concerns for TUSD. In June 2023, the project temporarily halted attestations due to balance discrepancies.

TUSD reserves are held across various institutions, including US banks with federal deposit insurance, an unnamed Hong Kong bank (formerly First Digital Trust), an unnamed Bahamas bank (formerly Capital Union Bank), and a Swiss bank. 

This decentralized custody model aims to mitigate risks but has shown weaknesses. In October 2023, TrueUSD suffered a data breach through former vendor TrueCoin, which previously handled banking, customers, and products. The incident exposed sensitive client information like names, emails, and phone numbers of users who joined in 2018-2019.  

The latest attestation troubles have sparked a TUSD selloff. The token fell below its $1 peg to $0.98 on Jan. 16. 

Selling volume on exchanges like Binance exceeded $430 million over 24 hours. Traders are opting to convert TUSD to alternatives like Tether during this period of uncertainty.

A Transparency Challenge Amidst Regulatory Pressure

TUSD’s struggles come amid a backdrop of regulatory pressure on stablecoins. Questions surround whether certain dollar-pegged tokens hold sufficient dollar reserves to redeem all outstanding tokens. While Tether settled charges over its reserves last year, TUSD has yet to provide clear evidence backing its reported fully collateralized status.

Justin Sun, Tron founder and Grenada ambassador, has close ties and a complex history with TUSD. Sun acquired the stablecoin through the Poloniex exchange in 2019. However, an SEC lawsuit alleged he operated Poloniex illegally in the US after the acquisition.  

While Sun claims TUSD is transparent, the unexplained attestation issues and user data leaks raise accountability concerns.

With stablecoin regulation imminent, TUSD’s instability does not bode well for Sun’s business dealings. It remains to be seen whether Justin Sun can provide proof for the $1.93 billion backing of the TrueUSD. TUSD needs to urgently restore the broken reserve dashboard to demonstrate reliable collateralization to holders.