Crypto exchange Huobi is facing insolvency rumors as a result of $64 million in outflows on Aug. 5 and 6, following news that the company’s top executives are being investigated by Chinese authorities. The trading platform’s TVL has fallen by 20% as a result, going from $3.09 billion to $2.5 billion as of this writing.
Over the past two weeks, Huobi has lost at least one C-level executive, though it is unknown if the resignation is related to the Chinese probe. Then, on August 4, allegations surfaced claiming that one of its high-level execs had been detained in China as a result of the exchange’s alleged links with gambling firms.
Huobi representatives, on the other hand, have categorically disputed the accusations, calling them fake news and asserting that the exchange is “currently doing well.” Justin Sun, the founder of the TRON blockchain and the key adviser of the Seychelles-based trading platform, also released official remarks denouncing the rumors as “FUD.”
Adam Cochran, a crypto analyst and investor at Cinneamhain Ventures, originally made the doomsday predictions, stating that Huobi is “deeply insolvent” [based on statistics on USDT volumes on the exchange’s balance]. He said that the exchange’s balance is ten times lower than its client obligations and that it is steadily declining.
In addition, Cochran charged the TRON founder with fund embezzlement for allegedly supporting his other defi apps and providing a yield to encourage users to make additional deposits.
“Justin Sun Prop Up DeFi Apps To Attract Huobi Deposits”
Just is using the same assets in Huobi, JustLend, Poloniex, and his other apps to enrich himself, and hoping users don’t withdraw or are not informed enough to hear of the issues. So users *think* they have balances of $631M, but there is only $90M there. The rest Justin Sun is using to prop up his other defi apps, and paying a yield on it to get users to deposit more into Huobi.
The analyst further argued that even Binance has resorted to selling Tether as a result of recognizing that Sun doesn’t actually have the USDT he claims to, and if users find out, they might mass dump to get off of his exchange.
“When Binance heard that Huobi/Tron employees were being investigated in relation to actions at the exchange, they started slamming the 3CRV USDT sell into DAI to mitigate their risk. Because Huobi is deeply insolvent.”