According to DeFiLlama, the Huobi crypto exchange experienced significant outflows of funds, amounting to an astonishing $64 million over the weekend. This adds to the ongoing decline in the total value locked on the exchange, which has decreased from $3 billion to $2.5 billion within the past month.
Renowned crypto Twitter analyst, fintech executive, and angel investor Adam Cochran recently raised concerns about the financial stability of Huobi. He revealed that Binance, a prominent global cryptocurrency platform, had started a large-scale sale of Tether (USDT), a popular stablecoin.
Cochran speculated on the reason behind Tether’s sell-off, suggesting it could be linked to Huobi’s financial instability. He further mentioned “unusual balance shifts” at Huobi over the past month.
Cochran connected these observations to rumors circulating about Huobi executives and individuals associated with Tron, a blockchain platform founded by Justin Sun, being questioned by the police.
In a now-deleted tweet, Cochran shared a list of names of detained individuals, including the heads of human resources, server operations, product, and chain tech, who all reported to Tron CTO Marus Zhong.
According to Cochran’s theory, he speculated that Binance is not selling their Tether due to two reasons. Firstly, they could be looking to undermine USDT to promote other stablecoins that they can control and profit from. Alternatively, they may have realized that Sun does not possess the amount of USDT he claims, and if users find out, they might dump their holdings to exit his exchange.
Cochran then shared his understanding of Huobi’s assets. He alleged that Huobi only holds $90M of combined USDT and USDC assets. Furthermore, even though the “Merkle Tree Audit” by Huobi shows that their users have $631M worth of USDT balances, the actual amount of assets held by Huobi is only $90M.
Cochran hypothesizes that the missing funds are being utilized to support Tron, Poloniex, and other decentralized finance apps operated by Sun. However, the amount of missing assets suggests that Sun may only be accountable for about half of Huobi’s total obligations.
In response to these allegations, the head of social media for the exchange took to Twitter, calling rumors of police involvement “completely untrue” and stating that Huobi’s operations were “normal as usual.” She urged for more investigation into the source of these claims and advised against spreading fear, uncertainty, and doubt (FUD).
Cochran maintained his position and disclosed that his source is a senior executive at Tron who possesses direct knowledge of the investigation and has been with Tron for a considerable period of time.
He concluded by stating that, whether they are aware or not, the colleagues of the person he mentioned are currently subjects of a criminal investigation.
Huobi has faced additional challenges this year, including reducing its workforce by 20% in January and receiving an order to halt operations in Malaysia. According to reports, at least one top-level executive has also departed from the exchange in recent weeks.
