Huobi, a leading cryptocurrency exchange, has been caught up in a storm of controversy amid rumors of insolvency and investigations into its executives by Chinese authorities. Over the weekend of 5-6 August, the exchange saw a substantial outflow of $64 million, resulting in a decrease in the total value locked (TVL) on the platform from $3.09 billion in July to $2.5 billion.
Rumors began to circulate on August 4, suggesting that Huobi’s leadership had been arrested in China, allegedly in connection with an investigation into the exchange’s links with gambling platforms. Later, Adam Cochran, a fintech executive and angel investor, voiced concerns about Huobi’s financial stability in a series of tweets.
Cochran highlighted inconsistencies in the exchange’s Tether (USDT) holdings, suggesting potential insolvency, stating:
1/16
— Adam Cochran (adamscochran.eth) (@adamscochran) August 5, 2023
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
Cochran’s analysis, supported by on-chain data from DeFiLlama, showed that Huobi held less than $90 million in assets across USDT and USD Coin on August 5. However, Huobi’s most recent “Merkle Tree Audit” claimed that users held $630 million in USDT, leading Cochran to question the accuracy of these figures. As such, he concluded that the platform is “deeply insolvent.”
In response to these allegations, Huobi’s head of social media denied the rumors and assured that the exchange was operating as usual. However, Cochran stood his ground, citing a senior executive at Tron as his source of information.
Huobi’s chief, Justin Sun, also addressed the rumors, indirectly suggesting that the exchange was not facing insolvency. He encouraged the community to ignore the fear, uncertainty, and doubt (FUD) and to trust in the ongoing development of Huobi and Tron.
Despite the ongoing controversy, Huobi has been actively pursuing crypto-friendly developments in Hong Kong. Earlier this year, the exchange applied for a crypto trading license in the region, demonstrating its commitment to maintaining operations amidst regulatory challenges.
Meanwhile, in 2023, Huobi encountered several hurdles, including staff reductions and a directive to halt operations in Malaysia. It was also reported by media publisher Cointelegraph that at least one senior executive had left the exchange recently, although the report was unclear if this departure is linked to the ongoing investigations.
