The financial viability of cryptocurrency exchange Huobi is being questioned by analyst Adam Cochran, who contends that the company may be insolvent as a result of discrepancies in its Tether (USDT) holdings.
Cochran’s analysis of Huobi’s “Merkle Tree Audit” reveals that despite the exchange’s customers believe they possess $631 million worth of USDT, only $90 million is really stored in Huobi’s accounts. Since the Merkle Tree Audit ceased updating last month, the difference is alarming.
Cochran asserts that Justin Sun, a well-known name in the cryptocurrency field and the creator of the Tron network, may be responsible for the decline in Huobi’s USDT assets.
Sun is accused of manipulating the yield to encourage additional deposits into Huobi by leveraging the assets of Huobi customers to promote his decentralised finance (DeFi) services.
Additionally, according to Cochran, Sun allegedly turned user Ethereum (ETH) balances into stETH, with only half of the 141,000 ETH that Huobi users are alleged to have possessed really being present in Sun’s accounts.
In addition, he asserts that rival cryptocurrency exchange Binance may be aggressively selling its Tether to Huobi.
The expert claims that Binance is attempting to weaken USDT’s hegemony by endorsing alternative stablecoins that they can control and benefit from. Cochran suggests that another explanation is that Binance may be aware of Sun’s exaggerated USDT holdings and is attempting to safeguard itself against a potential mass sell-off by Huobi users.
He emphasises that it appears that the financial duties of the bitcoin exchange are not in balance. Even taking into account the money Sun is said to have moved from Huobi to his DeFi applications, it appears that just around half of Huobi’s entire commitments are covered. Sun is charged by Cochran with using Huobi as his “personal piggy bank.”
Cochran says that because Binance was made aware of an investigation into Huobi and Tron workers, its strong USDT sell-off may have been a risk management tactic. These claims cast a troubling light on Huobi’s financial situation and feed speculation about the company’s potential collapse.
