The Huobi cryptocurrency exchange has been hit with outflows totaling a staggering $64 million this past weekend, continuing a long decline in the total value locked (TVL) on the exchange to $2.5 billion from $3 billion a month ago, according to DeFiLlama.

Adam Cochran—a fintech executive, angel investor, and renown crypto Twitter analyst—recently raised eyebrows with a series of statements regarding the apparent financial instability of Huobi. He reported that global crypto heavyweight Binance had commenced the bulk sale of Tether (USDT), a leading stablecoin.

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“Why is Tether selling off? Likely due to Huobi's insolvency,” Cochran mused, later adding that there had been "weird balance shifts at Huobi" over the past month.

Cochran connected these observations with recent rumors that Huobi executives and personnel from Tron, a blockchain platform founded by crypto entrepreneur Justin Sun, were questioned by police.

Cochran even posted a list of names of people he said were detained, including its heads of human resources, server operations, product, and chain tech—all of whom reported to Tron CTO Marus Zhong. But the tweet was subsequently deleted.

“I don't think Binance is selling their Tether for two reasons,” he theorized. “They want to topple USDT to push [stablecoins] they can control and gain from, [or] they realize Sun doesn't have the USDT he claims to and if users find out they might mass dump to escape his exchange.”

Cochran then broke down his understanding of Huobi’s holdings.

“Across USDT and USDC combined, Huobi only holds $90M of assets,” he alleged. “Huobi's own ‘Merkle Tree Audit’ still lists that Huobi users have $630M of USDT held and a wallet balance of $631M USDT—users think they have balances of $631M in Huobi, but there is only $90M there.”

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The missing funds, Cochrane theorized, are being used to prop up the yields of Tron, Poloniex, and other DeFi apps operated by Sun. But even those amounts suggests that Sun “only seems to have about half the total obligations for Huobi.”

Following these claims, the exchange's head of social media responded on Twitter, saying the report of police involvement “has been pure rumors” and asserting that “all operation has been normal as usual” at Huobi.

“I believe there needs to be more investigation into the information source and avoid FUD,” she wrote.

Cochran stood his ground, revealing that his source is “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,” he concluded.

Huobi has seen other woes this year, from laying off 20% of its staff in January to an order to cease operations in Malaysia. Cointelegraph also reports that at least one C-level executive has left the exchange in the past few weeks.

Editor's note: This story was drafted with Decrypt AI from sources referenced in the text, and fact-checked by Ozawa.

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