In a recent turn of events, Huobi, a prominent cryptocurrency exchange, has encountered significant outflows amounting to a staggering $64 million over the weekend. This trend follows a notable decline in the exchange’s total value locked (TVL), which has dropped from $3 billion to $2.5 billion within a month, according to data from DeFiLlama. Adam Cochran, a respected fintech executive, angel investor, and crypto Twitter analyst, has raised suspicions about Huobi’s financial stability through a series of intriguing statements.
Huobi wading through allegations amid heavy outflows
Cochran’s observations were ignited by reports of global cryptocurrency heavyweight Binance engaging in a substantial sale of Tether (USDT), a leading stablecoin in the crypto market. The apparent trigger for Cochran’s speculation is the correlation he drew between Tether’s sell-off and the alleged insolvency of Huobi. He postulated that Huobi’s questionable financial situation could be linked to “weird balance shifts” that have taken place on the exchange over the past month.
Adding intrigue to the situation, Cochran’s insights coincided with rumors circulating about police inquiries involving Huobi executives and personnel from Tron, a blockchain platform founded by crypto entrepreneur Justin Sun. Cochran even shared a list of names, claiming they had been detained, including individuals responsible for human resources, server operations, product management, and chain technology. However, the tweet containing the list was subsequently removed.
Cochran’s conjecture ventured further as he speculated about the motivations behind Binance’s Tether sale. He suggested that Binance might be aiming to undermine USDT’s dominance and promote stablecoins they can control, or they could be concerned that Tron’s USDT holdings might not be as substantial as claimed. Cochran’s theory was founded on his understanding of Huobi’s holdings.
Questions continue to surround the exchange’s stability
According to Cochran, when combining both USDT and USDC, Huobi holds only $90 million in assets. In contrast, Huobi’s self-reported “Merkle Tree Audit” indicates that its users hold $630 million worth of USDT, with a wallet balance of $631 million. This discrepancy implies that while users believe they have substantial balances on the exchange, the actual funds might be significantly less. Cochran further speculated that the missing funds could be utilized to bolster the yields of Tron, Poloniex, and other DeFi applications associated with Justin Sun.
However, even if this theory holds, Cochran indicated that Sun’s obligations for Huobi appear to be only about half of the total obligations. In response to Cochran’s claims, Huobi’s head of social media took to Twitter to address the situation. She categorically denied the rumors of police involvement, asserting that the exchange’s operations have been proceeding normally. She urged for a thorough investigation into the source of the information and cautioned against spreading fear, uncertainty, and doubt (FUD).
Cochran remained steadfast in his stance, revealing that his source is a senior executive at Tron with direct knowledge of the investigation. He maintained that, regardless of whether others were informed, certain colleagues were indeed under criminal investigation. Huobi has experienced a series of challenges throughout the year, including laying off 20% of its staff in January and being instructed to halt operations in Malaysia.
Furthermore, recent reports indicate that at least one C-level executive has departed from the exchange in recent weeks. As the situation continues to unfold, the allegations and speculations surrounding Huobi’s financial stability and its alleged connection to Tether’s sell-off have created a cloud of uncertainty within the cryptocurrency community. While Cochran’s claims have raised eyebrows, further investigations will be essential to uncover the truth behind these intricate developments.