Category: HTUSDT

HTX (formerly known as Huobi), one of the leading cryptocurrency exchanges, has been embroiled in a new controversy as Justin Sun, Tron’s founder and BitTorrent’s CEO, faces allegations of a staggering $2.4 billion shortfall in user funds. 

Adam Cochran, Managing Partner at Cinneamhain Ventures, has shed light on the intricate details of the alleged malpractice, revealing a web of “financial manipulations.”

Huobi Crisis Unveiled?

Cochran’s analysis raises concerns over Huobi’s financial stability, questioning the integrity of the exchange’s claims regarding its holdings of Ethereum (ETH) and USDT, a stablecoin pegged to the US dollar. 

As seen in the chart above, while Huobi asserts assets worth $200 million in ETH, Cochran’s investigation, corroborated by defillama data, reveals a discrepancy, with the actual value amounting to under $113 million, even when considering wrapped ETH (WETH) and staked ETH (stETH).

The situation further unravels when examining Huobi’s purported $624 million USDT holdings. However, Cochran’s findings indicate that only $119 million of USDT resides within the exchange, while the remaining balance is in staked USDT (stUSDT). 

What raises suspicion is that Justin Sun has enabled staked USDT (stUSDT) a staking feature, which allows users to stake either USDT or TUSD (TrueUSD) to earn stUSDT, as reported by NewsBTC. 

Allegations Mount Against Justin Sun 

Instead of following the expected protocol of burning staked assets to claim the cash and take it offline, these funds are redirected to Justin Sun’s addresses or utilized to support JustLend, a lending platform associated with the Huobi ecosystem.

Contrary to Huobi’s claim that it burns the stUSDT with Tether, Cochran’s investigation reveals that the counterparties for USDT on Huobi are the exchange’s deposit wallets or Binance. 

This suggests that Justin Sun may utilize USDT from user balances on Huobi to generate stUSDT, subsequently leveraging the underlying USDT to support JustLend or repurchase TUSD on Binance.

Cochran concludes that this complex financial arrangement, including TUSD deposits into stUSDT, effectively mints “fake assets” against an unknown equity. 

As a result, Cochran estimates that Justin Sun’s alleged debt to users across the Huobi and Tron ecosystems amounts to approximately $2.4 billion, all while users remain unaware of the situation.

Huobi has not yet formally responded to these allegations, leaving the situation’s outcome uncertain. However, the possibility of Huobi’s insolvency raises significant concerns regarding the security of user funds and the overall trustworthiness of the exchange.

It remains to be seen how this situation will develop and what actions will be taken to address these concerns effectively.

Featured image from Shutterstock, chart from TradingView.com

Huobi Global, a prominent cryptocurrency exchange, is at risk as investments in the staked USDT (stUSDT) project soar to $1.8 billion. The project, spearheaded by crypto entrepreneur Justin Sun, promises 5% returns tied to low-risk securities like government bonds. 

However, according to a Bloomberg report, Huobi’s heavy involvement in the project raises concerns about the exchange’s ability to manage sudden outflows of funds and the transparency of its reserves. 

Huobi’s Association With stUSDT Sparks Concerns And Triggers Institutional Withdrawals

Per the report, Huobi’s close association with the stUSDT project has led to a significant transformation in the exchange’s crypto reserves. 

Altering by this shift and the lack of transparency surrounding stUSDT, institutional traders have withdrawn a substantial portion of their crypto holdings from Huobi. 

This withdrawal trend highlights the potential risks of Huobi’s concentration on the stUSDT platform. Notably, blockchain research firms have expressed concerns about the relative lack of transparency surrounding the stUSDT project.

The absence of comprehensive information about its investments raises questions about the source and sustainability of the advertised 4.2% yield. Huobi’s reliance on the project exposes the exchange to problems that may arise within stUSDT, further magnifying its potential vulnerabilities.

As investments in stUSDT have grown, Huobi’s Tether (USDT) reserves have plummeted, raising further concerns. While Huobi maintains that stUSDT is a separate project not overseen by the exchange, the heavy concentration of stUSDT in its reserves implies that Huobi’s fortunes are closely linked to the success or failure of the project. 

The dominance of tokens associated with Justin Sun, such as TRON (TRX) and Huobi Token (HT), in Huobi’s reserves adds another risk layer, as market participants could perceive it as a higher exchange risk.

Huobi Global’s Average Daily Trading Volume Plummets

Institutional clients, including crypto funds and market makers, have expressed concerns about the dominance of stUSDT and other tokens associated with Justin Sun in Huobi’s reserves. 

According to Bloomberg, these clients have withdrawn a significant portion of their digital assets from the exchange shortly after the launch of the staked Tether project. This departure from Huobi has contributed to a decline in the exchange’s average daily trading volume.

The stUSDT project’s rapid growth and lack of transparency raise questions about its underlying investments and the sustainability of its returns. Investors and industry experts emphasize the importance of increased transparency and oversight to understand the sources of yield and mitigate potential risks.

Per the report, the project’s management team intends to engage a reputable third-party verification entity to enhance community oversight. However, further details about the project’s structure and employees remain scarce.

What is certain is that Huobi Global’s involvement in the stUSDT project has significantly impacted the composition of its reserves, raising concerns among institutional traders and industry experts. 

The heavy concentration of stUSDT, TRX, and HT tokens in Huobi’s reserves and the lack of transparency surrounding the project pose potential risks to the exchange’s financial stability. 

To alleviate these concerns, greater transparency and oversight are essential, ensuring the sustainability and credibility of the stUSDT project and Huobi’s operations in the evolving crypto landscape.

Featured image from iStock, chart from TradingView.com