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Adam Cochran, the Managing Partner at Cinneamhain Ventures, has cast doubt on the financial stability of the Tron blockchain founder, Justin Sun, and his majority-owned cryptocurrency exchange, Huobi. Cochran alleges that Huobi may owe its customers an astonishing $2.4 billion, with questionable reserves to cover these customer deposits.
1/6
Oh btw Huobi is probably insolvent again.
Claims to have $200M in ETH, defillama shows less than $113M even if you add in weth and steth.
Claims users hold $624M in USDT. But there is only $119M USDT in the exchange. pic.twitter.com/zghTpGRBzn
— Adam Cochran (adamscochran.eth) (@adamscochran) September 25, 2023
Huobi’s Reported Holdings Under Scrutiny
The accusations surfaced through a series of tweets by Cochran, who asserted that the exchange’s reported holdings are inconsistent with the data available through DeFi analytics.
Cochran’s thread began with a bold statement, “Oh btw Huobi is probably insolvent again,” and raised significant concerns about the exchange’s financial health.
According to Cochran, Huobi claimed to possess approximately $200 million worth of Ethereum (ETH). Still, DeFiLlama data indicated holdings of less than $113 million, even after including wrapped ETH (wETH) and synthetic ETH (sETH).
Furthermore, Huobi asserted that its users held $624 million in Tether (USDT), but DeFiLlama data revealed only $119 million USDT within the exchange. The remainder was allegedly held in a novel form known as “stUSDT.”
Cochran highlighted a peculiar aspect of stUSDT, allowing users to stake USDT or TrueUSD (TUSD) to earn stUSDT. Normally, staking operations should result in a burn, effectively removing assets from circulation.
However, he claimed that funds from staking activities were flowing into Justin Sun’s personal addresses instead, raising suspicions about the exchange’s intentions.
Moreover, Huobi might be utilizing the underlying USDT assets to support its DeFi lending platform, JustLend, and possibly engaging in TUSD buybacks on Binance.
4/6
Instead they go to Justin Sun’s personal addresses, and in turn against debt to prop up JustLend.
Or to Huobi, and the claim was Huobi was burning them with Tether – but instead Huobi counterparties for USDT end up being its own deposit wallets or Binance. pic.twitter.com/CsTWVfZDpN
— Adam Cochran (adamscochran.eth) (@adamscochran) September 25, 2023
This complex web of financial operations, combined with the creation of stUSDT and JustLend, led Cochran to estimate that Justin Sun might be indebted to users across the Huobi and Tron ecosystems to the tune of $2.4 billion, all while keeping users in the dark about the precarious financial situation.
The allegations raised by Cochran prompted a range of responses from the cryptocurrency community. Some questioned the accuracy of DeFi analytics tools, especially when dealing with multiple wallets, hardware wallets, and bank reserves.
However, he clarified that Huobi had reported its own assets and self-reported wallet data to DeFiLlama, suggesting that these numbers should match but were off by hundreds of millions of dollars.
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