Huobi Sees Over $60 Million Outflows Amid Insolvency Rumors

Executives from Huobi have denied reports that executives from the crypto exchange are the subject of an investigation.

Data from DeFi Llama shows that crypto exchange Huobi saw over $60 million worth of outflows over the weekend, bringing Total Value Locked (TVL) at the exchange down to $2.5 billion at the time of writing.

The larger-than-normal outflows followed reports that senior executives at the exchange had been arrested by Chinese police, amid an investigation into whether the firm provided payments and settlements through cryptocurrency for gambling programs.

🚨 #Huobi 🚨

Police in China 🇨🇳 are making arrests https://t.co/6HFpCqtpx1 pic.twitter.com/CJkSxiqIbH

— Parrot Capital 🦜 (@ParrotCapital) August 5, 2023

Soon enough, rumors began circulating that Huobi stakeholder and Tron founder Justin Sun had also been arrested. However, according to Adam Cochran, an industry watcher who claims to have inside information from sources at Tron, Sun himself has not been detained, but rather, employees from the exchange are being interrogated on matters related to “Huobi and Sun’s money laundering.”

Yes. I’ve not heard any other new developments beyond confirming:

1. It happened
2. Some Huobi execs were warned to leave
3. Tron employees whistleblowing to avoid getting caught up
4. Huobi staff aware of balance issues and were assured “Sun will take care of it with his vast…

— Adam Cochran (adamscochran.eth) (@adamscochran) August 6, 2023

Cochran also claims that Huobi is likely insolvent, evidenced by a rapid selloff of USDT on Friday after the news of the alleged police investigation was made public, and weeks of steady decline in USDT reserves at the exchange. His analysis points to Huobi holding just $90 million worth of USDC and USDT, despite Huobi’s “Merkle Tree Audit” claiming a wallet balance of $631 million USDT.

12/16

But it’s not just that.

All the user ETH is missing as well, Sun has turned it into stETH. All of it.

Users think they hold 141,000 ETH on Huobi and instead Sun holds about half that total balance and its all in stETH. pic.twitter.com/AwKQ8ZOqKm

— Adam Cochran (adamscochran.eth) (@adamscochran) August 5, 2023

Meanwhile, executives from Huobi refuted these claims, labeling the rumors as FUD with no basis. 

“This malicious rumor has been confirmed untrue, and Huobi is currently doing well. Huobi global will continue to provide trustworthy service to crypto users,” wrote Huobi’s head of social media on Twitter.

Another Huobi community manager also denied that any executives from the exchange had been questioned by law enforcement.

The source has been verified as a senior executive at Tron who has first hand knowledge of the investigation and has been at Tron for many years.

Whether you’ve been informed or not, your colleagues are currently under criminal investigation.

— Adam Cochran (adamscochran.eth) (@adamscochran) August 6, 2023