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Huobi Removes “China Arrest FUD” as Insolvency Fears Swirl & Execs Allegedly Investigated

Last Updated August 9, 2023 8:52 AM
Teuta Franjkovic
Last Updated August 9, 2023 8:52 AM
Key Takeaways
  • Cryptocurrency expert Adam Cochran claims that executives from Huobi and Tron were detained in China.
  • Cochran reported an abrupt withdrawal of $36 million in USDT within the previous 48 hours
  • Justin Sun urged his Twitter followers to continue creating despite the fear-mongering surrounding insolvency.

During the last two days, between August 5 and 7, rumors arose about Huobi having major issues regarding its reserves and internal administration, but the exchange has said  it’s all FUD.

Huobi saw significant withdrawals  of $64 million over the past two weekends, according to blockchain analytics firm Nansen. Additionally, on August 5 and 6, rumors were that Chinese authorities were looking into the exchanges’ leadership.

CCN reached out to Huobi with a member of the PR team stating that sources of misinformation about arrests in China had been removed and corrected.

“In regards to the recent China arrest FUD, all original sources of misinformation have been contacted to remove and correct, Huobi expressively reserves the right to take legal actions against platforms or individuals with acute intents to mislead or defame,” a PR Team Member from Huobi said in an email to CCN.

The exchange’s total value locked (TVL), which was $3.09 billion last month, substantially decreased to $2.5 billion due to these persistent rumors.

Investor Accuses Justin Sun of Using Huobi as His Own ‘Piggy Bank’

Adam Cochran, a well-known crypto analyst, and angel investor, expressed worries about Huobi in a recent series of tweets .

This came as a response to allegations that Chinese authorities had questioned several executives from Huobi and Tron.

Cochran’s allegations are supported by a thorough examination of Huobi’s financial statements and Justin Sun, the founder of Tron’s, recent activity. Cochran claims  Sun has been using the exchange as his own personal piggy bank, diverting money to his other DeFi projects while leaving the exchange with inadequate assets to fulfill its responsibilities.

Users believe they have $631 million in Huobi balances, while only $90 million exists. The remainder is being used by Justin Sun to support his other DeFi apps and is being paid a dividend to encourage customers to make additional deposits, Cochran Tweeted.

Examining Huobi’s Cryptocurrency Balance Sheets

Even though the exchange only has $90 million in assets, Cochran drew attention to the fact that the exchange’s own “Merkle Tree Audit” still shows that Huobi customers have $630 million worth of USDT owned and a wallet balance of $631 million. He asserted  that this difference is an obvious indicator of insolvency.

Cochran observed a huge sell-off  of Tether (USDT) on Binance, which he feels is related to the concerns over Huobi’s collapse, further complicating the situation. A USDT variation that Sun recently created called “stUSDT,” which Sun claims is backed by government bonds, also sparked his anxiety. Cochran claims that the stUSDT lacks adequate support, which increases the risk.

Huobi In Denial

In response, Huobi community manager Xandi stated that all operations are regular and denied any misconduct. Cochran refuted this, saying  that his source—a top official at Tron—had confirmed that team members were, in fact, being looked into for their involvement with Huobi.

“Huobi’s current total balance is $2.5 billion, of which $662 million is Tron, $500 million is HT, $884 million is BTC (which is supposed to also cover the $3 billion in BTC issued on Tron), and $168 million is HBTC,” Cochran continued .

There are still more assets worth $286M. Consequently, even the combined value of all the other liquid assets on the exchange is less than one-third of the declared amount of USDT commitments.

Justin Sun Dispels Rumors of Huobi’s Bankruptcy

Justin Sun, the head of Huobi Exchange, has addressed  the claims that the exchange is bankrupt. Sun commented on the Huobi situation on Twitter: “Ignore FUD, keep building! #TRON and #Huobi will thrive through continuous development. Trust in our vision and community efforts for a stronger future. Perseverance guarantees success!”

Huobi, on the other hand, has been closely monitoring all the cryptocurrency-friendly events in Hong Kong, which recently unveiled a framework for using cryptocurrencies by businesses operating in the city. Huobi also applied for crypto trading licence in Hong Kong

There have been numerous reports of issues with the Huobi exchange in the past. To ensure transparency, Sun and his colleagues have nevertheless maintained communication in every situation.

Huobi Responds: Ignore FUD, Let’s keep building!

Just a few hours after Cochran’s and Sun’s tweets, the exchange decided to answer  and clarify everything happening.

The company said that since Mainland Chinese people stopped using Huobi in late 2021, the company has been making progress slowly but steadily.

It added  that various users of the “social media comedy” always declare Huobi “dead” or “caught” personnel, and this year is no exception. While it’s hard to witness a portion of this sector warm-bedding such bias, glee, and even hatred, the company decided to stand stronger and more aggressively confront and defend the crypto industry against all the baseless charges and defamations.

Huobi wrote that it has been aware that the path ahead is difficult but that it was more committed than ever because the industry needs individuals who share the commitment to BUIDLing the blockchain area.

“Refuse FUD, lend a hand to one another, and always rely on your own judgment,” said Huobi, and added that some men simply want to see the world burn on occasion. “We assert that we are distinct from those people,” wrote  Huobi.

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