Crypto exchange Huobi experienced significant outflows worth $64 million during the weekend amid rumors regarding investigations conducted by Chinese authorities into its executives and the exchange’s insolvency.

On August 4, rumors emerged about the possible arrest of exchange executives in China, which were said to be connected to an alleged investigation into the exchange’s dealings with gambling platforms.


Huobi’s spokespersons refused the claims, dismissing them as fake news. The head of the exchange’s social media department clarified on Twitter that the rumors were unfounded and the exchange is “currently doing well.”

Concerns over Huobi’s solvency have been raised as well. In his tweets thread, Fintech executive and angel investor Adam Cochran pointed out discrepancies in the exchange’s USDT assets, suggesting possible insolvency.

According to on-chain data by @DeFiLlama, on August 5, the exchange held less than $90 million in USDT and USDC combined. However, Huobi’s latest “Merkle tree audit” report claimed that “Huobi users have $630M in USDT held and a wallet balance of $631M USDT.” Another troubling aspect of this discrepancy is that the Merkle tree audit stopped updating last month.

Cochrane’s analysis suggests Huobi’s USDT assets shortage may be linked to the actions of Justin Sun, the founder of the Tron network. Sun is accused of using Huobi users’ assets to support his DeFi applications, artificially inflating yields to attract more deposits to Huobi.


Furthermore, Cochran claims that Sun converted users’ ETH balances into stETH, with only half of the total 141,000 ETH believed to be owned by Huobi users actually present in Sun’s accounts.


According to the analyst, Binance’s aggressive USDT sell-off might be a strategic move against Huobi (aiming at reducing USDT’s dominance in the market and promoting other stablecoins that Binance can control and profit from), or it might be a risk mitigation strategy, possibly in response to reports of investigations into Huobi and Tron employees. Additionally, one may suggest that Binance may be aware of Sun’s over-claimed USDT holdings on Huobi and aims to protect against a potential mass sell-off from Huobi users.