Huobi, one of the largest cryptocurrency exchanges, faced an outflow of $64 million between Aug. 5-6. This occurred due to rumors about the financial stability of the exchange and allegations that Chinese agencies were investigating its officials. However, the company’s total value locked (TVL) fell sharply, from $3.09 billion last month to only $2.5 billion now, DeFiLlama showed.
It was rumored that Huobi’s top executives were arrested in China on August 4th. Reportedly, the action took place due to an investigation into the company’s connection with gambling platforms. But a spokesperson from Huobi rejected the allegations and confirmed that the business was functioning smoothly.
This malicious rumor has been confirmed untrue, and #Huobi is currently doing well. Huobi global will continue to provide trustworthy service to crypto users.♥️
— 谢家印@Hu🅾bi (@xiejiayinHuobi) August 6, 2023
Although the exchange has maintained a brave external front, it is facing internal changes due to rumors. Moreover, many top executives have reportedly left the exchange in recent weeks, including at least one C-level official. However, it is unclear whether this results from the ongoing inquiries.
Concerns About Huobi’s Crypto Balance Sheets
Concerns about Huobi’s insolvency are further fueled by the allegation that the exchange holds significantly less Tether (USDT) in its reserves than indicated in its reserve reports. Adam Cochran, a famous crypto analyst and investor, has raised concerns on social platform X (formerly Twitter).
Adam alleged that the founder of the Tron network, Justin Sun, used Huobi customers’ money to fund his decentralized finance (DeFi) initiatives. However, Sun put the Huobi in danger. Cochran pointed out that Huobi could be insolvent as it has insufficient funds to meet its obligations.
“So users think they have balances of $631M in Huobi, but there is only $90M there. The rest Justin Sun is using to prop up his other defi apps, and paying a yield on it to get users to deposit more.”
As DefiLlama reported on August 6, Huobi wallets held just $72 million in USDC and USDT combined.
Cochran also mentioned a significant Tether (USDT) sell-off on Binance, the largest crypto firm by trading volume. He believes Binance knows about problems with Huobi’s USDT holdings. He also raised concerns about the stUSDT, a variant of USDT, issued by the Sun recently. Sun said stUSDT is supported by government bonds.
So why is Tether selling off?
Likely Huobi insolvency.
-Binance started selling off USDT in bulk.
-We found out that Huobi execs (and Tron personnel questioned by police)
-This is not long after Sun's stUSDT launch
-And weird balance shifts at Huobi in the last month pic.twitter.com/f3HViYS93a
— Adam Cochran (adamscochran.eth) (@adamscochran) August 5, 2023
Cochran argues that stUSDT lacks sufficient support, which further increases the potential risk. He said Sun converted Houbi users’ half of the 141,000 ETH into stETH.
Notably, the exchange’s operations in other areas are also affected. Malaysia’s securities regulator forced Huobi to shut down operations in Malaysia in May this year.