FactMosaic logo

Huobi Exchange News: Chinese Authorities Launch Investigation – Is Huobi Exchange Facing Insolvency?


Amidst mounting worries about its financial robustness, Huobi, a prominent cryptocurrency exchange, finds itself grappling with difficulties. These concerns have triggered a substantial exodus of funds and set off a flurry of conjectures surrounding its operational integrity. The exchange has been prompted by persistent conjectures about its reserve holdings of an inquiry by Chinese authorities.

Huobi Faces $64 Million Fund Outflow and TVL Drop Amidst Speculations and Rumors

In a rapid turn of events spanning a mere 48 hours, Huobi achieved a noteworthy milestone. Between August 5 and August 6, the exchange encountered a significant outflow of funds amounting to $64 million. This sudden movement of assets has led to a decrease in the total value locked (TVL) of the exchange. That is causing it to plummet from $3.09 billion on July 6 to the current level of $2.5 billion.

A cloud of rumors emerged on August 4, hinting at the possible apprehension of Huobi’s leadership in China. However, it’s important to note that these rumors were primarily associated with an alleged inquiry into the exchange’s potential association with gambling platforms.

Huobi Firmly Denies Rumors Amid Regulatory Scrutiny, Executives’ Departures

Nonetheless, a representative from Huobi has refuted these assertions. Categorically denying any veracity to the claims and asserting that the exchange is running without disruptions. These rumors have surfaced at a juncture when reports indicate heightened vigilance by Chinese regulatory bodies over cryptocurrency exchanges operating.

As a result of the circulating rumors, Huobi has also witnessed internal shifts. Notably, certain pivotal executives, including at least one C-level officer, have purportedly departed from the company over the past few weeks. The connection between these departures and the ongoing investigations, if any, remains uncertain. However, officials from Huobi have contested these speculations on Platform X, affirming the company’s sound state and dismissing the rumors.

Concerns Mount Over Huobi’s USDT Holdings and Allegations Involving Justin Sun

Nonetheless, there is a notable unease surrounding Huobi’s holdings of Tether (USDT) expressed by fintech executive and investor Adam Cochran. Cochran points out discrepancies in Huobi’s USDT holdings, indicating a potential disparity between the reported amount and the actual reserves. This concern gains further traction from Huobi’s “Merkle Tree Audit,” which discloses that as of August 5, the exchange possessed less than $90 million in USDT and USD Coin (USDC) assets, a marked contrast to the perceived control of $631 million as held by consumers.

Additionally, Adam Cochran raises suspicions regarding the involvement of Justin Sun, the founder of the Tron network. Cochran suggests the possibility that Sun might have utilized funds belonging to Huobi’s customers to finance his personal decentralized finance (DeFi) initiatives, thereby posing a potential risk to Huobi’s financial stability. Furthermore, Cochran alleges that Sun converted a significant portion of Huobi users’ 141,000 ETH into stETH, potentially entailing consequences for the exchange’s resources.

Analyst Suggests Binance’s Strategic Move to Undermine Huobi Amidst Tether

The analyst further postulates the notion that Binance might be engaged in the sale of Tether with the intention of undermining Huobi’s position. This strategic move by Binance could involve the promotion of other stablecoins under its control, thereby securing advantageous profits. Cochran speculates that Binance could be well-informed about potential apprehensions related to Huobi’s Tether reserves and is taking preemptive measures to safeguard itself from any potential mass sell-off initiated by Huobi users.

The combination of these challenges, coupled with the regulatory enforcement actions taken by Malaysian securities regulators that led to the closure of Huobi’s Malaysian operations earlier this year, has sparked apprehensions regarding Huobi’s fiscal well-being and viability.

Leave a Response