Executives Arrested, Insolvency Concerns? Huobi Exchange Accused of Misappropriating Assets

The cryptocurrency exchange Huobi has recently been embroiled in controversy, with several executives reportedly under investigation by Chinese authorities and employees being asked to leave the country. Rumors of bankruptcy and asset misappropriation have also surfaced, with locked assets on-chain continuously flowing out, causing panic among users. Huobi officials have dismissed these claims as FUD (fear, uncertainty, and doubt), but have not responded to multiple allegations.

Recent Controversies Surrounding Huobi

Huobi Executives Summoned by Chinese Authorities

According to reports by Wu Blockchain and Techub News, at least three high-ranking Huobi executives involved in research, design, and finance were taken away by Chinese authorities for investigation. Other employees were notified at short notice to leave the country.

The article on the Techub News website has been deleted, but the tweet remains.

Huobi Insolvent?

Adam Cochran, a partner at venture capital firm Cinneamhain Ventures, also tweeted yesterday alleging that Huobi is already insolvent.

According to data from DefiLlama and Merkle Tree Audit, Huobi currently holds around $65 million in USDT and USDC.

However, Huobi's reported total user assets are $630 million, while the wallet balance is $631 million. Although this report has not been updated for a month, there is a significant discrepancy between user reserves and on-chain data.

Transparency of stUSDT?

He also questioned the flow of funds for stUSDT, pointing out that all the stUSDT tokens supposedly related to government bonds seem to have flowed into either Justin Sun or Huobi's official wallet addresses.

Adam stated that if stUSDT truly existed, the approximately $500 million in funds should have been redeemed for USDT and used to generate returns through bonds, but this was not the case. All funds were sent to Huobi, Justin Sun's TRON, and Binance addresses, with most being transferred to TRON's DeFi lending protocol, JustLend.

In other words, Justin Sun may be diverting Huobi funds to support his own DeFi applications on TRON and pay interest on them.

Internal Sources: Confirmed Diversion, Full Efforts to Protect TRON.

This morning, Adam continued to update on the matter, providing information regarding Huobi's internal statements to employees.

Executives have been arrested, and the authorities have been notified. While it is true that Justin Sun has indeed diverted user assets, his personal wealth far exceeds that of Huobi's users, so there will be no run on the platform.

Additionally, internally they are eager to clarify the relationship between TRON and Huobi and hope that TRON itself will not be affected by this negative event.

Huobi Team Response

TRON founder Justin Sun, along with community managers Jiayin and Xandi, have repeatedly stated on Twitter that the above claims are all false rumors, but have not responded to any specific allegations.

TVL Outflow

According to data from DefiLlama, the total value locked (TVL) in Huobi Exchange has been continuously decreasing over the past month, dropping from $3.065 billion to $2.518 billion, representing approximately an 18% decrease.

There were even several days in mid to late July where nearly $100 million in user assets flowed out, indicating a relatively large outflow over the past year, raising concerns about its security.