Huobi sees US$105 million outflow amid insolvency rumors

Huobi sees US$105 million outflow amid insolvency rumors

Time Stamp: August 9, 2023 7:03 AM
Source Node: 2812215
Huobi Global’s stablecoin exchange balance fell 51% in the seven days to Tuesday for an outflow of over US$105 million, according to data from blockchain analytics firm Nansen . The Seychelles-based crypto exchange is in turmoil amid insolvency rumors and investigations by the Chinese police. 

On Sunday, crypto analyst Adam Cochran highlighted a recent bulk sell-off of the USDT stablecoin across cryptocurrency exchanges, including Binance. 

1/16 So why is Tether selling off? Likely Huobi insolvency. -Binance started selling off USDT in bulk. -We found out that Huobi execs (and Tron personnel questioned by police) -This is not long after Sun's stUSDT launch -And weird balance shifts at Huobi in the last month pic.twitter.com/f3HViYS93a — Adam Cochran (adamscochran.eth) (@adamscochran) August 5, 2023

Cochran attributed the sell-off to a potential Huobi insolvency issue related to stUSDT — a staked USDT product recently launched on the Tron blockchain. Tron’s founder Justin Sun is an advisor and stakeholder at Huobi. 

Launched in July 2023 and billed as the “world’s first real world asset” product, stUSDT allows investors to stake their USDT to earn yields. Sun claims that stUSDT is backed by government bonds carrying a yield of 4.29% . 

Cochran’s analysis found that, while the stUSDT website claims it has 351,411 stakers, 98% of staked USDT is directly held by addresses related to either Sun or Huobi. 

That staked USDT “gets swept into a Huobi deposit address,” Cochran said, where a significant portion is then recycled into Sun-held decentralized finance protocols. This has produced a US$500 million discrepancy in redemptions from Huobi addresses on Tron, which — if functioning as expected — would otherwise have gone towards buying bonds for yield. 

Although Huobi’s own “Merkle Tree Audit” showed on July 1 that Huobi users held US$630 million in USDT and the platform had a wallet balance of US$631 million in USDT, the audit stopped updating last month. DefiLlama data shows that the exchange only had a combined USDT and USDC balance of around US$93 million when Cochran posted his tweets over the weekend.

“So users *think* they have balances of $631M in Huobi, but there is only $90M there,” Cochran said on Twitter. “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.”

Adding to Huobi’s trevails, Hong Kong online media Techub News reported on Saturday that several of Huobi’s executives were detained by the Chinese police and under investigation, citing unnamed sources. Cochran pointed to that news in his analysis as a sign of Huobi’s alleged insolvency issues. 

Xie Jiayin, head of social media at Huobi, took to Twitter Saturday to dismiss the news. 

This malicious rumor has been confirmed untrue, and #Huobi is currently doing well. Huobi global will continue to provide trustworthy service to crypto users.♥️ — 谢家印@Hu

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