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Over the weekend, the well-known cryptocurrency exchange, Huobi, experienced a substantial financial drain. Reports show that between August 5-6, there was an outflow of $64 million from its funds. Notably, this resulted in the exchange's total stored value plummeting to $2.5 billion, a significant drop from the $3.09 billion it held just a month earlier on July 6.
Tensions escalated on August 4 when speculations emerged, suggesting that several key figures within Huobi's leadership had been detained by Chinese officials. The basis for these suspicions was an alleged probe into the exchange’s interactions with gambling outlets. Despite these serious claims, a spokesperson from Huobi was quick to refute them, branding such rumors as baseless.
Another noteworthy development is the recent exit of a top-tier executive from Huobi. However, it remains uncertain if this move was a direct consequence of the speculated investigations in China. Public reassurances were made on the social media platform, X (previously known as Twitter). Here, the person responsible for managing Huobi’s social media communications mentioned that such speculations were baseless and that the company was operating efficiently.
Furthermore, Adam Cochran, a fintech specialist and investor, brought to light potential discrepancies in Huobi’s financial records. He highlighted potential solvency concerns. Cochran's research, using data from DefiLlama, demonstrated that Huobi's assets on August 5 totaled less than $90 million, combining USDT and USD Coin (USDC). This finding starkly contrasts with Huobi's latest "Merkle Tree Audit" which claimed a balance of $631 million in USDT alone. Cochran's assessment of the situation is clear – he believes Huobi could very well be facing severe insolvency issues.
The data from DefiLlama on August 6 further complicates the picture, indicating Huobi's wallets containing a mere $72 million when combining USDT and USDC. Despite reaching out, Huobi refrained from offering any immediate clarification to the queries related to these financial discrepancies and solvency rumors.
It is worth noting that Huobi is grappling with regulatory pressures internationally. A case in point is the action by Malaysia's securities regulator earlier this year in May, which led to the shutdown of Huobi's operations in the country.
