Cryptocurrency analyst Adam Cochran has raised concerns about the financial stability of the Huobi cryptocurrency exchange, suggesting that the company may be insolvent due to discrepancies in its holdings of the tether (USDT) stablecoin.
Cochran presented his analysis in a Twitter thread on August 5th, pointing out that only USD 90 million is held in Huobi’s accounts, while the platform claims there are around USD 631 million of USDT in user funds.
This discrepancy has sparked speculation, especially because Huobi’s proof-of-reserves audit, or Merkle Tree, has not been updated for a month.
In his thread, Cochran also mentions the alleged actions of Justin Sun, the founder of Tron, which could be related to the USDT deficit in Huobi. He recalls that Sun is accused of using user assets to back his decentralized finance (DeFi) applications, which could affect the exchange’s stability.
The analyst also suggests that Binance might be strategically selling its tethers (USDT) to reduce USDT’s dominance in the market and promote other stablecoins controlled by the company.
Binance’s sales could be motivated by the fact that Binance USD (BUSD), the platform’s stablecoin, will stop circulating next year.
This decision came after its issuer, Paxos, decided to halt its issuance due to a legal investigation by the U.S. Securities and Exchange Commission (SEC).
Hence Cochran’s argument that the company may be protecting itself from a potential massive sell-off by Huobi users.
The situation seems to indicate that Huobi’s financial obligations are imbalanced, even considering the funds transferred by Sun to his DeFi applications. Therefore, Cochran accuses Sun of treating Huobi as his “personal piggy bank.”
Twitter users responded to the thread with similar sentiments, with some directly pointing fingers at Justin Sun and criticizing the underestimation of intelligence in the crypto financial sector.
However, others considered the analysis as “simple FUD,” a term used to describe fear, uncertainty, or doubt spread to scare Huobi investors.
As of now, the exchange has not commented on the matter, nor has Justin Sun, who is cited as the cause of the deficit. Nevertheless, this is not the first time the platform has faced such accusations.
In July, Huobi responded to similar comments, stating that they were unfounded and attributing the declines to the withdrawal of the exchange from certain markets. The platform emphasized that fluctuations in user base and assets are within the normal range at that time.
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