Andrew Thurman

On Friday afternoon, HTX board member Justin Sun undertook a mass printing of the little-used stablecoin TUSD, a move that caught the attention of traders as over $815 million entered circulation in less than 15 minutes.&nbsp;



Starting at 11:45 am ET, data from <a href="https://tronscan.org/#/token20/TUpMhErZL2fhh4sVNULAbNKLokS4GjC1F4">Tronscan</a> shows that $815 million <a href="https://blockworks.co/price/tusd">TUSD</a> was minted directly to the Tron blockchain across a series of 10 transactions. Each of the mints was to a new address, which then immediately sent funds to the Huobi 2 hot wallet.



Prior to these transactions, the last TUSD mint to Tron was seven days ago.&nbsp;



Shortly after these deposits, a series of nine transactions from the Huobi 2 address sent TUSD totaling roughly $815 million to a well-known and closely-watched <a href="https://tronscan.org/#/address/TT2T17KZhoDu47i2E4FWxfG79zdkEWkU9N">address</a> managed by <a href="https://blockworks.co/tag/justin-sun">Justin Sun</a>.&nbsp;



The funds were then sent to an unlabeled contract whose <a href="https://tronscan.org/#/contract/TLT4iNRdYn9avUepRbUkPZxgRsZot1tm56/code">code</a> refers to it as “minterproxy.” Minterproxy then sent $865 million in TUSD to another <a href="https://tronscan.org/#/address/TQiXPTvHuqaBW94pqrbgwptkSFXsMLrxnM/transfers">address</a>, which in turn burned the tokens.&nbsp;



However, the TUSD burns happen to align almost perfectly with mints of stUSDT. Across 10 transactions, $865 million stUSDT were minted to Sun’s <a href="https://tronscan.org/#/address/TT2T17KZhoDu47i2E4FWxfG79zdkEWkU9N/transfers">address</a>. Sun then deposited the stUSDT to Tron-based lending platform JustLend over a series of <a href="https://tronscan.org/#/address/TT2T17KZhoDu47i2E4FWxfG79zdkEWkU9N/transfers">six</a> transactions.



The deposits today now account for half of Sun’s $1.5 billion JustLend position, per Tronscan.&nbsp;



StUSDT is a staked <a href="https://blockworks.co/price/usdt">USDT</a> product that currently yields 4.2%, with claims that the yield comes from real-world assets (RWAs). According to the stUSDT website, which Blockworks viewed via a proxy as United States IP addresses are geofenced, the yield is generated via “high-grade short-term government bonds.”&nbsp;



Per DeFiLlama data, JustLend’s total value locked (TVL) increased 17% to $4.63 billion following the deposits.&nbsp;



In a recent <a href="https://cryptoslate.com/tether-denies-affiliation-with-justin-sun-linked-stusdt-protocol/">statement</a> to CryptoSlate, a Tether spokesperson said that stUSDT was “an independent project and is not affiliated with Tether.” Additionally, in July, TUSD parent company Archblocks co-founder <a href="https://twitter.com/tier10k/status/1680959101814161409?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1680959101814161409%7Ctwgr%5Ee282f3b3b38d9033ab93d95e060454601b05fe7f%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fbeincrypto.com%2Fjustin-sun-accused-secretly-acquiring-trueusd-tusd%2F">accused</a> Sun of acquiring TUSD through various shell companies.&nbsp;



Sun, who was charged with <a href="https://blockworks.co/news/sec-sues-justin-sun">fraud and other securities laws violations by the SEC in March</a>, said in a statement to Blockworks that the transactions were related to his personal fund and not Huobi business.&nbsp;



Updated Sept. 20, 2023 at 4:50 pm ET: This article has been been updated to remove a quote given on background.



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Justin Sun prints $800M in little-used stablecoin

Michael Bodley

Bessie Liu

With short interest mounting, traders say they’re parsing liquidity, as well as pricing, on the stablecoin True USD.&nbsp;



The issuers of True USD (<a href="https://blockworks.co/price/tusd">TUSD</a>) had previously claimed that it had “no exposure” to digital asset on- and off- ramp company <a href="https://blockworks.co/tag/prime-trust">Prime Trust</a> that had been recently <a href="https://blockworks.co/news/tusd-under-attack">shut down</a> by Nevada regulators.



But most recent attestation reports as reviewed by Blockworks, said that it has a $26,000 exposure to the company — which <a href="https://blockworks.co/news/prime-trust-owes-customers-85m">regulators have moved to place under receivership</a>. That exposure, though, is a pittance of TUSD’s $3 billion circulating supply.&nbsp;



Minting and redemption mechanisms around TUSD tokens have become muddled, with some users saying they’ve had trouble on both fronts.&nbsp;



Carlos Gonzalez, a research analyst at 21.co, told Blockworks on Thursday that it “didn’t make a lot of sense” for TUSD’s apparent liquidity issues to be attributed to its $26,000 of Prime Trust exposure alone.&nbsp;



“It’s insignificant,” Gonzalez said. “It’s basically nothing [compared to its $3 billion circulating supply]. If it had just been $26,000, it didn’t make a lot of sense for the stablecoin to pause minting and redemptions — but apparently Prime Trust was the clearing bank [of TUSD], and that’s why that happened.”&nbsp;&nbsp;



Users recently attempting to mint their TUSD were getting the stablecoin <a href="https://blockworks.co/news/tusd-under-attack">re-minted</a> into their wallets. TUSD had previously relied on Prime Trust to maintain its on- and off-ramp services between crypto and fiat for its users, Protos originally <a href="https://protos.com/prime-trust-accused-of-using-customer-funds-to-cover-lost-deposits/">reported</a>.&nbsp;



A Thursday independent audit of TUSD’s internal documented figures, including its holdings and associated reserves, said that the $26,000 of assets “were held at a U.S. depository institution which has communicated to customers that the institution has been ordered by state regulators to halt deposits and withdrawals for at and digital asset accounts.”



Those findings, which industry participants have said refer to Prime Trust, “impede our ability to obtain [sufficient] and appropriate evidence” regarding TUSD’s issuer’s “assertions that cash balances held in collateral at the aforementioned US-depository institution are readily convertible to know amounts of cash,” the report said.&nbsp;



It wasn’t immediately clear whether additional cash or TUSD assets reside with Prime Trust. Representatives for Prime Trust and TUSD did not return requests for comment or declined to comment.



<h2 class="wp-block-heading">TUSD depegging</h2>



The price of TUSD has fallen off as a result, depegging from the US dollar, currently trading at <a href="https://blockworks.co/price/tusd">$0.99</a>, according to Blockworks data. It had depegged more significantly prior to Thursday, paring its losses toward the end of the week.&nbsp;



Concerns around The Network Firm’s attestations of TUSD have also surfaced.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Wait, the auditor who has been attesting to the <a href="https://twitter.com/search?q=%24TUSD&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$TUSD</a> audits (in Prime Trust) was the old FTX auditor who set up under a new name after the FTX scandal?!?!? These guys literally audited the biggest grift in history and just renamed themselves?!? <a href="https://t.co/HSUNhG9lkS">https://t.co/HSUNhG9lkS</a>&mdash; Adam Cochran (adamscochran.eth) (@adamscochran) <a href="https://twitter.com/adamscochran/status/1673832056944558080?ref_src=twsrc%5Etfw">June 27, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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But Nic Carter, a general partner at Castle Island Ventures, said that two firms are not the same.



“The Network Firm is not a relaunch of Armanino, it’s a new firm entirely dedicated to crypto audits, stablecoin attests etc,” Carter <a href="https://twitter.com/nic__carter/status/1674064927609221121">tweeted</a>. “Armanino shuttered their crypto biz because they got a lot of heat post FTX.”



In the meantime, centralized exchange Kraken has <a href="https://blog.kraken.com/trading-for-trueusd-tusd-starts-june-29-deposit-now">revealed</a> that it will now support the deposits and withdrawals of TUSD on Justin Sun’s Tron Network, giving users the ability to withdraw the token if they wish to do so.&nbsp;



Interest in stablecoin-based lending, meanwhile, has remained relatively robust, Gonzalez said. That’s been demonstrated, in at least one metric, by liquidity on DeFi-based lending solutions that support TUSD and additional stablecoins.&nbsp;



TUSD is the fifth-largest stablecoin by market capitalization, trailing <a href="https://blockworks.co/price/dai">DAI</a>, and it has traded $138 million in terms of volume over the last 24 hours, according to Blockworks Research.&nbsp;



There’s no shortage of short interest against TUSD, according to Gonzalez, which has had “some impact on price.” But borrowing on the stablecoin has picked up significantly, with TUSD allocations in Curve3pool jumping to about 70% through Wednesday, notching a gain from its 27% standing as of June 20.



“People aren’t able to actually redeem right now,” he said. “It’s just getting minted back on-chain, and so that’s obviously a bad sign. We should wait and see if it’s just because of Prime Trust, and if they’re able to stave off this process.”



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Emerging Prime Trust ties have traders fretting over TUSD

Traders are rushing to short stablecoin TrueUSD.



The mounting short interest comes after cryptocurrency custodian Prime Trust could no longer <a href="https://blockworks.co/news/nevada-regulator-prime-trust">fulfill withdrawal requests</a> — and after BitGo yanked its bid to purchase Prime Trust.&nbsp;



US-based Prime Trust — known for fiat to digital asset on- and off-ramps — had before that been <a href="https://blockworks.co/news/prime-trust-said-to-be-scrambling-for-emergency-cash-package">struggling for cash</a> and had recently been ordered by a Nevada financial regulator to half operations under a cease-and-desist order.



<a href="https://blockworks.co/price/tusd">TUSD</a> representatives have <a href="https://twitter.com/tusdio/status/1671898163039596544">said</a> the stablecoin is unaffected by the situation, claiming it had “no exposure” to Prime Trust and maintained “multiple USD rails for minting and redemption.”



Protos <a href="https://protos.com/scoop-trueusd-pauses-attestations-amid-prime-trust-issues/">reported</a> earlier this week that TUSD had paused routine attestations of the stablecoin, and no shortage of traders have continued to place short bets against it since.&nbsp;



On Aave, traders are paying up to <a href="https://app.aave.com/reserve-overview/?underlyingAsset=0x0000000000085d4780b73119b644ae5ecd22b376&amp;marketName=proto_mainnet">50% APY</a> to short the asset, with one user placing a $4 million short on the stablecoin.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">$4m TUSD short put on on aave-v2 <a href="https://t.co/1accT3o45d">pic.twitter.com/1accT3o45d</a>&mdash; Will Sheehan (@wilburforce_) <a href="https://twitter.com/wilburforce_/status/1671902723006951435?ref_src=twsrc%5Etfw">June 22, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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The TUSD Curve Pool shows similar signs — with its currency reserves reaching <a href="https://curve.fi/#/ethereum/pools/tusd/deposit">61%</a>.&nbsp;



A Twitter user who goes by etheraltog, noted that users attempting to redeem TUSD are getting it re-minted to their wallets.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">people try to redeem tusd and it just gets reminted to them a couple of days later lmao <a href="https://t.co/a6kxTuXPBT">pic.twitter.com/a6kxTuXPBT</a>&mdash; alto | dollar.eth (@etheraltog) <a href="https://twitter.com/etheraltog/status/1672178922488844288?ref_src=twsrc%5Etfw">June 23, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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TUSD slightly <a href="https://blockworks.co/price/tusd">depegged</a> from the dollar but regained its $1 peg through midday Friday.



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TUSD under attack following Prime Trust insolvency

Casey Wagner

TrueUSD (<a href="https://blockworks.co/price/tusd">TUSD</a>) is quickly climbing the stablecoin dominance charts, thanks to Binance. 



In top stablecoins by market capitalization, TUSD is now ranked number 29. The token’s market capitalization increased from around $755 million at the end of 2022 to $2.4 billion on Monday.



The stablecoin, which was relatively unknown until recently when <a href="https://blockworks.co/tag/binance">Binance</a> made BTC-TUSD a zero-fee trading pair, lost its dollar peg Monday, hitting a high of $1.20 relative to USDT on Binance. 



Binance’s BTC-TUSD pair is now one of the highest-volume trades in the entire industry, researchers from Kaiko said.&nbsp;



“TUSD liquidity has not kept pace with its volumes, making a depegging like this more likely,” Kaiko analysts added. &nbsp;



Monday’s TUSD depeg coincided with a number of users on Aave and Compound borrowing large amounts of the token, apparently with organic transactions, Kaiko said.&nbsp;



“The most common strategy was borrowing TUSD and swapping for USDC, effectively shorting TUSD from its elevated price,” analysts added. “However, neither Aave nor Compound have a large supply of TUSD, which meant that borrowing rates quickly surged, hitting over 100% APR on both protocols.”&nbsp;



The move also coincided with Tron founder <a href="https://blockworks.co/tag/justin-sun">Justin Sun</a> depositing over $50 million worth of TUSD on Binance, spurring speculation that Sun was trying to farm the SUI liquidity pools on Binance, which requires users to stake TUSD or BNB. Binance CEO Changpeng “CZ” Zhao threatened Sun with legal action, and Sun then admitted someone on his team was using a portion of the funds to farm, but most were to be used for market making TUSD on the exchange.



“Looking at market depth for the TUSD-USDT pair on Binance, someone has been adding liquidity in massive size: the pair is now the most liquid pair on Binance after a huge $200mn injection of orderbook liquidity at the 1% level,” Kaiko added.&nbsp;



With increased depth and surging demand — thanks, SUI launchpad — TUSD is securing its spot as a top player in the stablecoin landscape.



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