Huobi Solvency Concerns Resurface as Sun Addresses $8M Hack

Huobi insolvency claims emerge again following 5,000 ETH hack.

Huobi teritory - an Ethereum Gem about to get robbed by a hacker.
Created by Kornelija Poderskytė from DailyCoin
  • Huobi has fallen victim to a hack.
  • Amid the exploit, concerns over the firm’s solvency have resurfaced.
  • A bounty has been offered to the hackers in the apparent wallet compromise.

Despite Huobi‘s recent rebranding to HTX, the exchange is again in the headlines for all the wrong reasons.

On Sunday, September 25, the firm’s global advisor and Tron founder, Justin Sun, confirmed that the exchange had been hacked for 5,000 ETH (worth approximately $8 million). While Sun revealed that the exchange would cover the losses, speculations around the approach taken to do so have raised eyebrows within the crypto community, further fueling insolvency speculations.

HTX Solvency Concerns Spring Up Again

In a Twitter statement on September 25, HTX’s Sun, assuring users of the safety of customer deposits, disclosed that the exchange had covered losses from the Saturday, September 24 hack.

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"$8 million represents a relatively small sum in comparison to the $3 billion worth of assets held by our users. It also amounts to just two weeks' revenue for the HTX platform," the exchange's global advisor asserted.

However, not many appear convinced by Sun’s assurances, as minutes later, a prominent member of the crypto community, “Napgone,” had claimed that $8 million TUSD had just been minted on the Tron network and sent to HTX, leading many to conclude that Sun, who is heavily linked with the stablecoin had minted tokens out of thin air to cover customer losses. 

These speculations have yet to be confirmed on-chain. 

Meanwhile, crypto analyst and Cinneamhain Ventures partner Adam Cochran also poked holes at Sun’s assurances on the safety of customer deposits, again raising concerns about Huobi’s financial health. Like in August, Cochran has compared balances claimed by HTX in its Merkle Tree audit to balances shown by on-chain data seen on Defi Llama and sourced from wallets reported by HTX.

As highlighted by Cochran, while the exchange claims to hold $200 million in ETH in reserve, Defi Llama data places it at around $120 million, combining ETH and stETH holdings at the time of writing. Similarly, the exchange’s USDT holdings fall short of the claimed $624 million even after adding the now controversial stUSDT product, at around $524 million. The analyst alleged that it was likely that the exchange had an overall $2.4 billion hole in its balance sheet.

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HTX did not respond to a request for comment at press time.

All You Need To Know About the HTX Hack

On Sunday, September 25, multiple crypto security platforms reported suspicious activity on one of HTX’s wallets as 5,000 ETH (worth approximately $8 million) had been transferred to an external address. 

How the exchange’s wallet was compromised remains unclear. However, HTX’s Sun, in his statement, claimed that the exchange had detected the exploit almost immediately and moved to prevent further losses.

The Tron founder maintained that the exchange has “implemented real-time monitoring mechanisms” in addition to its multi-backup and multi-signature cold wallet storage methods to prevent future occurrences while claiming that, like Binance, the firm held a Secure Asset Fund for Users (SAFU) to cover such losses. A 2019 HTX blog post suggests that the firm supposedly created a security fund of 20,000 BTC in Q1 2018.

As is typically the case in most crypto hacks, HTX has offered a bounty to the hacker in return for the funds. This bounty includes 5% of the loot, or about $400k, and a role with the firm as a security advisor. On the other hand, the firm asserts that it intends to follow up the case with the help of law enforcement if the hacker fails to return the funds in seven days.

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Why This Matters

HTX remains one of the largest crypto exchanges in the world. Trouble at the firm could have significant spillover effects on the broader industry.

Learn more about Huobi’s solvency concerns:
Huobi Financial Health Questioned After Top Executives Arrested

Learn more about the latest flows from crypto investment products:
Crypto Outflows Tank 83% as European and U.S. Sentiments Diverge

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Okoya David

David Okoya is a crypto news reporter at DailyCoin based in Nigeria. He covers various topics related to the cryptocurrency industry, including exchanges, regulations, and price movements, and strives to bring fresh angles to breaking news. With experience as a freelance crypto news writer, David upholds the highest journalistic standards, telling complete stories and answering lingering questions whenever possible.