Huobi faces funds outflow amid insolvency rumours

From August 5 to 6, the crypto exchange Huobi faced a large outflow amid rumours of potential bankruptcy, with its TVL falling by almost $54 million.

Crypto analyst Adam Cochran published a post on X (formerly Twitter), which he later deleted. He claimed that some members of Huobi and Tron’s leadership were questioned by Chinese police.

Cochran even published a list of the names of people who could have been arrested.

After conducting his own audit of the exchange, the expert concluded that user balances total around $630 million, while the platform’s reserves were only $90 million.

The missing funds, as Cochran suggested, are being used to support the profitability of Tron, Poloniex and other DeFi applications controlled by Justin Sun.

In November 2022, media reports spoke of a possible merger between Huobi and Poloniex, which Sun and a group of investors bought in 2019. The entrepreneur denied the rumours, but did not rule out a similar development in the future. The platforms established a strategic partnership.

Moreover, the stablecoin Tether has been mildly depegged from the US dollar for about a week. According to Cochran, Binance has already begun a mass sell-off of USDT.

It is likely the company is simply promoting its own “stablecoins,” but the leadership may be aware of Huobi’s problems and is thus trying to minimise risk, the researcher says.

[Binance] wants to crash USDT to push the stablecoins that they can control and profit from. They understand that Sun doesn’t have the USDT he claims, and if users find out, they could trigger a mass sell-off,” Cochran added.

Meanwhile, balance reports, introduced after the FTX collapse, have not been published by the exchange for more than a month, the analyst noted.

A Huobi spokeswoman called the information “pure rumours.” She said the exchange is operating normally.

“I think it is necessary to conduct further investigation into the source of the information and avoid FUD,” she wrote.

Nevertheless, the expert continued to stand by his claim. He said the source was “a senior Tron executive who knows about the investigation from first-hand experience and has worked at the company for many years.”

Earlier in August, Justin Sun announced that Huobi had not shown net profit in the last four quarters. He expects to reach profitability in October–December.

Previously, white-hat hacker Aaron Phillips drew attention to a data breach affecting the platform’s users. He said the company had already fixed the issue, but the loophole had been active since 2021.