Huobi's $500 Million Nightmare: From a Rumor to Alleged Insolvency

<p>Rumors can
act as a dangerous weapon, triggering panic and leading to capital flight. The
<a href="https://www.financemagnates.com/terms/c/cryptocurrency-exchange/">cryptocurrency exchange</a>, Huobi learned this the hard way, losing $500 million due
to gossip that its leadership had been arrested in China and that the platform
was on the verge of bankruptcy.</p><p>Huobi's TVL Drops by $500
Million</p><p>Initial
reports of <a href="https://www.financemagnates.com/tag/huobi/" target="_blank" rel="follow">Huobi's troubles</a> emerged on 4 August after the initial news that
representatives from the exchange had been arrested in China in relation to
investigations involving ties to gambling platforms. On Twitter, Huobi's
spokesperson stated that rumors regarding the arrest of high-ranking exchange
representatives were false.</p><blockquote><p lang="en" dir="ltr">The source has been verified as a senior executive at Tron who has first hand knowledge of the investigation and has been at Tron for many years.Whether you’ve been informed or not, your colleagues are currently under criminal investigation.</p>— Adam Cochran (adamscochran.eth) (@adamscochran) <a href="https://twitter.com/adamscochran/status/1688020939047424002?ref_src=twsrc%5Etfw">August 6, 2023</a></blockquote><p>However, in
the meantime, there has also been mention of the platform's solvency issues, which
were reportedly related to the devaluation of the stablecoin Tether (<a href="https://www.financemagnates.com/tag/usdt/" target="_blank" rel="follow">USDT</a>).</p><blockquote><p lang="en" dir="ltr">1/16So why is Tether selling off?Likely Huobi insolvency.-Binance started selling off USDT in bulk.-We found out that Huobi execs (and Tron personnel questioned by police)-This is not long after Sun's stUSDT launch-And weird balance shifts at Huobi in the last month <a href="https://t.co/f3HViYS93a">pic.twitter.com/f3HViYS93a</a></p>— Adam Cochran (adamscochran.eth) (@adamscochran) <a href="https://twitter.com/adamscochran/status/1687959096316542976?ref_src=twsrc%5Etfw">August 5, 2023</a></blockquote><p>Analytical
data from DefiLlama confirmed that USDT and USD Coin
(USDC) were among the stablecoins of which Huobi held less than $90 million in assets as of 5 August. According to
the exchange's last audit, user accounts held $630 million in USDT alone. Thus,
Adam Cochran suggested that Huobi has significant solvency issues.</p><p>The current
data from DefiLlama shows that Huobi's wallets held just $72 million in USDT and
USDC. Simultaneously, the exchange's total value locked (TVL) dropped $500
million, from over $3 billion to $2.5 billion.</p><p>Huobi's Ongoing Troubles</p><p>Even though
Huobi denies these rumors, the outflow of capital from the exchange is
undeniable. But, these are not the platform's only problems. In May, it had to
shut down its operations in Malaysia after the Securities Commission Malaysia
(SCM) intervened. In fact, the exchange had not registered as a local cryptocurrency
operator, which meant that they had been operating illegally, leading to their website and
mobile apps being blocked in the country.</p><p>Earlier in
the year, Finance Magnates reported that the <a href="https://www.financemagnates.com/terms/e/exchange/">exchange</a> was planning <a href="https://www.financemagnates.com/cryptocurrency/crypto-downzing-continues-as-huobi-plans-to-prune-workforce-by-20/" target="_blank" rel="follow">to
lay off about 20% of its workforce</a>, aiming to maintain "a very lean
team" due to adverse changes in the industry and declines in
cryptocurrency asset valuations.</p><p>According
to <a href="https://www.financemagnates.com/cryptocurrency/gen-z-dominates-crypto-copy-trading-space-85-make-profit/" target="_blank" rel="follow">Bitget's latest report</a> by Bitget, the crypto space is currently dominated by Gen
Z investors. The study revealed that Gen Z users, who are typically tech-savvy
and influenced by social media, make up 44% of all copy traders on Bitget.</p>

This article was written by Damian Chmiel at www.financemagnates.com.