Huobi, one of the leading cryptocurrency exchanges, has experienced a record outflow of $64 million over the weekend. The withdrawals come in response to reports of the exchange’s executives being arrested in China and concerns about potential bankruptcy. Additionally, an angel investor has raised suspicions about Huobi’s reserve discrepancies.
Fearing the possible collapse of the cryptocurrency exchange, Huobi customers withdrew $64 million over the weekend. As speculation persisted, the Total Value Locked (TVL) on the exchange dropped from $3.09 billion last month to $2.5 billion.
This all began on August 4, when Chinese authorities allegedly arrested top executives at Huobi. Reports suggested that the arrests were the result of an investigation into the exchange’s links to betting websites.
Huobi has been facing challenges as regulations for cryptocurrency trading platforms in China appear to be tightening. Furthermore, uncertainty surrounds the recent resignation of a senior employee at the exchange, possibly related to ongoing investigations in China.
Huobi’s social media manager, however, denied the allegations and stated that the exchange is currently in a “good” position.
But according to angel investor and fintech manager Adam Cochran, Huobi is allegedly facing financial problems. Cochran specifically pointed out inconsistencies in the exchange’s Tether (USDT) balances.
“So users think they have $631 million in Huobi, but they only have $90 million. The rest is being used by Justin Sun to support his other DeFi apps and pay a yield to users to get them to deposit more at Huobi,” Cochran tweeted on August 5, 2023.
Huobi’s recent Merkle Tree Audit claims to hold $630 million in USDT, but on-chain data shows that they had assets worth less than $90 million on August 5. Cochran suggests that this indicates Huobi may not be able to fulfill its debts.
In response to the allegations that the crypto exchange is on the verge of failure, Justin Sun, the CEO of Huobi Exchange, has spoken out.
Huobi has also referred to the widespread information as FUD (Fear, Uncertainty, and Doubt) in a tweet, stating, “Over the past two days, people have been concerned about the spreading FUD. We would like to take a moment to respond openly, with absolute sincerity and clarity.”
In conclusion, Huobi, one of the largest cryptocurrency exchanges, has experienced significant outflows of funds due to concerns of impending bankruptcy and reports of executive arrests in China. An angel investor has also raised concerns about the exchange’s reserve transparency. Huobi’s CEO has responded to these allegations, dismissing them as FUD. The situation highlights the challenges faced by cryptocurrency exchanges in an increasingly regulated environment and the importance of financial transparency in the industry.