Huobi Global, a Seychelles-based cryptocurrency exchange, has seen a significant outflow of over $105 million, marking a 51% decrease in its stablecoin exchange balance in the past week.
The alarming outflow comes in the wake of rumors regarding the exchange’s insolvency and investigations by Chinese police.
Connection to Tron’s Founder
The situation has been further complicated by the connection to Justin Sun, the founder of Tron, who is an advisor and stakeholder at Huobi.
A recent bulk sell-off of the USDT stablecoin across various exchanges, including Binance, was attributed to potential insolvency issues related to stUSDT, a staked USDT product launched on the Tron blockchain. Sun has claimed that stUSDT is backed by government bonds with a yield of 4.29%.
Discrepancy in Staked USDT
An analysis by crypto analyst Adam Cochran found that 98% of staked USDT is directly held by addresses related to Sun or Huobi. This has led to a $500 million discrepancy in redemptions from Huobi addresses on Tron, raising questions about the transparency and integrity of the exchange’s operations.
Audit Concerns
Huobi’s “Merkle Tree Audit,” which showed users held $630 million in USDT, stopped updating last month. Data from DefiLlama revealed that the exchange only had a combined USDT and USDC balance of around $93 million, further fueling concerns about the exchange’s financial stability.
Rumors of Executive Detention
Adding to the turmoil, Hong Kong online media Techub News reported that several Huobi executives were detained by Chinese police. Huobi’s head of social media, Xie Jiayin, dismissed the news as a “malicious rumor,” but the report has contributed to the uncertainty surrounding the exchange.
Huobi’s Response
In response to the situation, Huobi issued a statement dismissing the rumors and insisting that the platform is “operating as usual.” The exchange did not specifically address the alleged insolvency or detention issues.
Xie Jiayin also commented on his Medium blog, stating that some blockchain data platforms did not fully display Huobi’s assets and addresses, and that the exchange has been actively contacting data providers to update the information.
The unfolding situation at Huobi highlights the challenges and risks associated with the rapidly evolving cryptocurrency market. The alleged connections between Huobi and Tron’s founder, the discrepancies in staked USDT, and the rumors of insolvency and arrests underscore the need for robust regulations and oversight in the industry.
As the situation continues to develop, investors and regulators alike will be watching closely to see how Huobi responds and what measures are taken to ensure transparency and accountability within the exchange.
