Executives Arrested, Insufficient Assets? Huobi Exchange Faces Accusations of Misappropriating Funds

Enumerating Recent Controversies Surrounding Huobi

According to a report two days ago (on the 5th), at least three senior executives of Huobi involved in research and development, design, and finance were taken away by Chinese police for investigation. Other employees have received temporary notices requesting them to leave the country promptly.

Huobi facing insolvency？

Adam Cochran, a partner at Cinneamhain Ventures, tweeted yesterday claiming that Huobi has long been insolvent.

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

However, Huobi reported total user assets of $630 million with a wallet balance of $631 million. Although this statement has not been updated for a month, a significant disparity between user reserves and on-chain data is still evident.

Transparency of stUSDT？

Adam also questioned the flow of funds in stUSDT, pointing out that the originally claimed government bond-related stUSDT from Huobi seems to have all flowed into addresses associated with Justin Sun or Huobi's official wallets.

Adam mentioned that if stUSDT truly existed, the approximately $500 million in funds should have been redeemed for USDT and the returns obtained through bonds, but this is not the case. All the funds have been sent to addresses belonging to Huobi, Justin Sun's TRON, and Binance, with a significant portion being transferred into TRON's DeFi lending protocol, JustLend.

In other words, Justin Sun may be potentially diverting funds from Huobi to support his own DeFi applications on TRON and to cover interest payments.

Internal Sources Confirm Misappropriation, Full Efforts to Protect TRON.

This morning, Adam continued to provide updates on the matter, offering insights into Huobi's internal communication regarding its employees.

(Executive Arrest Incident) There has been notification from the authorities. While Sun Yuchen did indeed misappropriate user assets, his personal wealth far surpasses that of Huobi users, thus a bank run is unlikely to occur.

In addition, internally there is a strong urgency to disassociate TRON from Huobi and ensure that TRON itself remains unaffected by this negative event.

Response from Huobi Team

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

TVL (Total Value Locked) depletion

According to DefiLlama data, 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% decline.

In the later part of July, there were even several days where nearly $100 million worth of user assets flowed out, indicating a significant outflow compared to the past year, raising concerns about its security.