What’s the similarity & difference between the user fund misappropriation (or rug pull) by First Digital Trust (FDT) and FTX? That’s a wild dejavu. In the case of FTX, Sam Bankman-Fried (SBF) approached me for a potential rescue plan during its final weeks, which I realized as mission impossible given its mess. Coincidentally, when FDT was exposed for its rug pull on TUSD reserve fund last year, I was again approached for funding support. But this time, I was compelled to back stop user losses, in my capacity as an advisor to Techteryx. Her is my insider’s takeaway from both cases. Starting with the conclusion: both are extremely serious and egregious cases of fraud and public fund misappropriation. However, the FDT case is significantly worse - here is why: At FTX, SBF packaged the fund misappropriation as collateralized loans, pledging Alameda Research’s holdings of FTT, SRM, FTX shares and Maps tokens against the “borrowing” of user funds. On surface, it looked like a structured loan backed by valuable collaterals. In contrast, FDT simply siphoned off $456m from TUSD’s custodial funds without client authorization or knowledge, and booked as loans to a dubious third party Dubai company without any collaterals. SBF, despite not having user authorization, at least used the funds for investments, the majority of which ended up in quality companies like Robinhood and Anthropic (AI firm). He didn’t use the funds for personal indulgence. In contrast, FDT, at the direction of its CEO Vincent Chok, was evidenced to have funneled the money into a fraudulent Dubai company which laundered the money subsequently. It also involved embezzlement of TUSD money that is a matter of criminal offense. After the FTX scandal broke, SBF at least made efforts to respond, hiring legal counsel and trying to recover user assets. Vincent Chok (卓君强), however, has acted deceptively and maliciously, pretending nothing happened when exposed. In the FTX incident, U.S. regulators and law enforcement acted swiftly, appointing liquidators, arresting perpetrators (including SBF), and working hard to contain the damage to user assets—thus protecting the reputation of the U.S. financial system. Now that the FDT scandal has surfaced, Hong Kong’s reputation as a global financial center is at stake. It’s also a test for the efficiency and strength of the regulators and law enforcement. Hong Kong must act like its U.S. counterparts—swiftly, decisively, and effectively. We cannot allow the fraudsters continue its pyramid scheme against the public.