HTX, formerly Huobi, is an exchange deeply connected to controversial crypto entrepreneur and trader Justin Sun, and its activities raise concerns about solvency and Sun’s effective control of user assets.

Ownership

While Sun denies controlling HTX, he’s previously admitted to being an ‘advisor’ and the business itself has previously described him as its leader. 

It appears that the acquisition of Huobi by About Capital Management in 2022 — a move that coincided with Sun’s appointment to the Huobi Global Advisory Board — marks the point at which his relationship with the exchange started to deepen.

Even the rebranding of Huobi to HTX may have been connected to this change in ownership, with the former owners, New Huo Tech and HBIT, openly denying connections to Huobi online and threatening lawsuits against the exchange for continuing to use the name. 

Additionally, Sun has reportedly attempted to sell his stake to Binance, and he claims that he owns a majority stake. 

stUSDT

Staked Tether (stUSDT) is a Sun-connected project that purports to invest USDT into yield-generating activities like purchasing United States treasuries.

Read more: Justin Sun’s empire may be on the verge of collapse

This asset’s marketing claims that it’s controlled by an entity called the Real World Asset Decentralized Autonomous Organization; however, Protos has been unable to find any decentralized or autonomous governance structures for this project.

We’ve reached out to stUSDT to determine if there’s a governance structure we missed and to ask for comment on whether it feels that it’s adequately decentralized and autonomous to refer to itself as a DAO. At press, it has not responded.

On Tron, 88% of this token is held in TDToUxX8sH4z6moQpK3ZLAN24eupu2ivA4, an HTX address.

On Ethereum, over 96% of the total supply of this token is held in 0x176F3DAb24a159341c0509bB36B833E7fdd0a132, an address labeled as ‘Justin Sun’ on Etherscan.

More troublingly, a review of the HTX proof-of-reserves reveals that much of the USDT on the exchange has been replaced with stUSDT. HTX claims in its proof-of-reserves (which it falsely describes as an audit) that it has $610 million worth of USDT. 

However, utilizing the tool HTX distributes to verify its proof-of-reserves, we can determine that the category described as ‘USDT’ actually contains other assets, including $460 million worth of stUSDT, representing approximately three-quarters of all USDT on the exchange.

Additionally, the USDT category includes $79 million worth of Aave Ethereum USDT, representing funds deposited into the Aave lending protocol.

Even more troubling may be the nearly $12 million USDT held as jUSDT, which is USDT deployed into the JustLend protocol on Tron.

These activities raise serious concerns about the quality and safety of USDT reserves on HTX.

USDD

USDD is a Sun-affiliated protocol that describes itself as an ‘algorithmic stablecoin’ despite the lack of any real algorithm or way to redeem the token once issued.

It’s supposedly governed by a decentralized autonomous organization (DAO), the TRON DAO Reserve; however, Protos has only been able to identify a single proposal that the DAO has voted on. 

Read more: Justin Sun’s empire crumbles as USDD depegs again

Even more troubling is the fact that a significant portion of the reserves, approximately $125 million worth of TRX, are stored in TZ1SsapyhKNWaVLca6P2qgVzkHTdk6nkXa, which is also included as an address involved in HTX’s proof-of-reserves.

This means the TRX tokens in this address are counted both as assets for HTX and as collateral for USDD. Furthermore, there are no governance proposals in the TRON DAO Reserve discussing the decision to store these assets at Sun-affiliated HTX.

WBTC on Tron

Wrapped Bitcoin on Tron (WBTC) is a product that was offered by Sun-owned Poloniex, that purported to transform bitcoin into a token that can be used on Tron.

Poloniex doesn’t publicly disclose where it stores the reserves for this product and it’s been unwilling to share them with Protos when we have reached out previously. Furthermore, Poloniex has since delisted the asset after a depeg, making it unclear if anyone can redeem it through Poloniex.

Despite the many issues with this asset, a review of the HTX proof-of-reserves reveals that of the 25,735 bitcoins stored on HTX, a total of 14,108 — more than half of the total — are this wrapped version with no transparency.

Read more: Binance banned Tron Foundation for market manipulation, report

Ethereum

A significant portion of the Ethereum on HTX is actually Lido Staked Ether (stETH) and ether bridged to the HTX-affiliated HECO Chain.

HTX’s proof-of-reserves reports a total of 92,630 ether on the exchange, but the vast majority of that is the 52,103 stETH and the 37,043 ether bridged to HECO Chain. There are a paltry 3,484 traditional ether on HTX.

HTX Token

Even when Sun was trying to downplay his influence over HTX, he was still willing to admit that he owned a large quantity of the Huobi Token.

Recently, the Huobi Token was somewhat converted to the HTX token, with a partial conversion being offered to Huobi Token holders. This conversion frustrated many holders, especially since it seemed to fulfill many of the same functions as the previous token but wasn’t offered as a direct 1:1 upgrade.

Less than 20% of the total HTX token supply was reserved for previous Huobi Token holders.

HTX token is purportedly governed by the HTX DAO. However, the ‘community autonomy’ for the DAO is still listed as ‘coming Soon.’ Weakening the argument that this will be the case is the fact that portions of the documentation and FAQ for HTX DAO are hosted on HTX. 

Furthermore, tokens were previously ‘unlocked’ by performing various activities on HTX, including hitting certain trading volumes.

Other concerns

HTX was hacked last year but is still lying about it, falsely claiming to Protos that “the platform has never had any security incidents in the past 10 years.” Even when pressed, and previous disclosures of the hacks were highlighted, HTX continued to lie and falsely claim that no security incidents had occurred. 

Additionally, HTX-affiliated Heco Chain was also previously hacked. Sun claimed that HTX would be able to fully cover these losses.

Assets from HTX are being used across a wide variety of Sun-connected protocols and entities, and the vast amounts of USDT and BTC removed raise concerns about both the quantity and quality of assets at HTX.

These issues with the assets at the beleaguered exchange are only one part of the picture, with Sun additionally facing a lawsuit from the Securities and Exchange Commission that alleges he engaged in wash-trading and market manipulation.

Protos has reached out to HTX with questions about its reserves but at press it has not responded.

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The post Justin Sun-advised HTX plays games with its reserves appeared first on Protos.

While Justin Sun immediately took to X to discuss the hack that occurred on his crypto exchange HTX (formerly Huobi), news of the loss has trickled into China through foreign media reporting. Sun hasn’t posted on his Weibo since the day before the hack, which resulted in a loss of about 5,000 ETH, transpired.

CoinDesk and other outlets reported on September 25 that Huobi had suffered an $8 million hack, with Sun promising that the amount was nothing when compared to the “$3 billion worth of assets held by (Huobi) users” and that “all funds are secure.”

It’s unclear why Sun hasn’t taken to Chinese social media to assuage the fears of users on the mainland, as according to SimilarWeb most traffic to the site appears to come from “other” jurisdictions, implying most customers are Chinese or Hong Kongers.

The site has also seen a dramatic rise in Russian users since the War in Ukraine began.

Since the most recent hack, the HT token — formerly the Huobi Token — has seen its price fall roughly 2%.

Read more: Justin Sun and Huobi play shell game with ownership

Hacked but still safe

While admitting to a loss of customer funds, Sun also stated that Huobi’s “multi-backup, multi-signature cold wallet system ensures 100% security.” Based on this hack alone, that’s clearly not true.

But this also isn’t the first time that Huobi has lost important customer assets: in July Protos reported that Huobi had accidentally given up two years’ worth of customer data in a breach. Despite this massive misstep, executives said, “The type of information leaked does not involve sensitive information and does not affect user accounts and fund security.”

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The post Justin Sun in no hurry to tell China about HTX hack appeared first on Protos.

Justin Sun is one of the most important people in cryptocurrency, with incredibly varied investments and holdings across the ecosystem. A crypto billionaire who effortlessly moves between launching new blockchains (usually forks of existing blockchains), launching new DeFi protocols (usually forks of existing DeFi protocols), and purchasing or advising any exchange, stablecoin, or company that will have him.

However, despite — or perhaps because of — this extremely active strategy, it’s impossible to determine exactly how wealthy Sun is. Here, Protos has attempted to detail Sun’s known holdings to demonstrate their size and interrelated nature.

Sun’s bitcoin

Sun may be a bitcoin whale but Protos was nevertheless unable to identify his holdings on-chain. He issued tethers on Bitcoin’s Omni layer before the stablecoin launched on Tron but addresses associated with that activity don’t lead to substantive bitcoin holdings that can be clearly attributed to Sun.

CoinDesk has previously revealed that Sun held $580 million of his bitcoin with Valkyrie Investments, a firm in which he’s one of the biggest shareholders. At the time, his bitcoin represented over 90% of the assets at Valkyrie Digital Assets.

Significantly, this also represents the largest holding of a single cryptocurrency that Protos was able to identify for Sun.

Read more: Tether Papers: This is exactly who acquired 70% of all USDT ever issued

Sun’s Ethereum wallets

There are several addresses tagged as connected to Justin Sun on Etherscan.  

The first is 0x3DdfA8eC3052539b6C9549F12cEA2C295cfF5296 which at the time of writing contains 133 ether valued at approximately $246,000. This wallet also holds more than $40 million worth of Sun’s own stablecoin USDD, several million dollars worth of CRV tokens, and 11 WBTC.

The wallet also regularly interacts with Aave and holds aTUSD, aWBTC, and aUSDT. Sun owns hundreds or tens of thousands of dollars worth of many other tokens in the wallet. Blockscan highlights that the address is also in use on a variety of other chains, notably BSC, where it holds around $5 million worth of TRX, an additional $32 million USDD, and $2 million in BTT.

On the BitTorrent chain, this address holds somewhere in the region of $1.5 million USDD. 

The second address associated with Sun is 0x621Fe33CCF74038dB90B18365cb450d677D4b3D8. It contains a de minimis amount of ether and other tokens and hasn’t been used in over 50 days. This wallet used to hold roughly 15,800 stETH, which have been submitted into the withdrawal queue.

Blockscan highlights that the address is in use on other chains, but there are no more meaningful assets associated with it.

The third address is 0x611F97d450042418E7338CBDd19202711563DF01, which contains slightly less than a single ether as well as some small amounts of assorted other tokens. Notably, it also has 20,000 staked ether in the Lido withdrawal queue. This address is also in use on a variety of other chains, but none of them have significant amounts of assets. It recently sent 45 million USDD to 0xBCb742AAdb031dE5de937108799e89A392f07df1, which used wrapped staked ether to take advantage of the increase in the DAI Savings Rate.

The fourth address, 0x176F3DAb24a159341c0509bB36B833E7fdd0a132, holds over 3,000 ether valued at nearly $6 million alongside a variety of other tokens, including nearly $1 million worth of ZRX.

It also has 13,000 staked ether in the Lido withdrawal queue and uses stETH to borrow DAI in order to take advantage of the DAI Savings Rate. Predictably, it’s in use across other chains, but none of them have significant assets.

Sun’s Tron wallets

After finishing his stint at Ripple where he led the development of their Chinese business, he eventually decided he should start his own blockchain.

Tron, which raised approximately $70 million in its initial coin offering (ICO), started as a fork of Ethereum, with minor changes and a plagiarized whitepaper.

He has since drained or abandoned most of the Tron addresses we were able to confirm he issued tether to, making it harder to identify his current holdings.

However, one that has been used more recently, TGddFQCnL913P6tpKdcwXxQTb3tgx5SAsp, contains about $2 million worth of TRX, as well as a de minimis amount of other tokens.

Another address, TT2T17KZhoDu47i2E4FWxfG79zdkEWkU9N, is commonly associated with Sun but he’s denied controlling it. It holds over $100 million in TRX, a massive quantity of stUSDT, interacts with Huobi and Poloniex, and was the first user of TrueUSD on Tron.

Beyond the large quantities of TRX, this wallet also has $16 million worth of USDD, $5 million worth of TrueUSD, $16 million worth of JUST, $2 million worth of BTT, and a variety of other tokens.

A Securities and Exchange Commission (SEC) lawsuit against Sun alleges that he and the entities he controls engaged in wash-trading and market manipulation of the TRX token, which they allege is a security.

Read more: The crypto bromance of Binance’s CZ and Tron’s Justin Sun

WBTC may be unbacked

WBTC on Tron, like other forms of wrapped bitcoin, involves tokens being issued on a blockchain by an entity that is supposed to be responsible for custodying the assets backing the tokens.

Just Cryptos, a product advertised on JustStable, describes these tokens and notes that Poloniex holds the backing. However, it provides no clarity on how to verify that sufficient bitcoin is held to reserve these tokens.

Protos has reached out to Poloniex, but they were not willing to provide the addresses which store the bitcoin for this product. Protos hasn’t identified any backing for these tokens at this point.

stUSDT has no DAO

Staked tethers (stUSDT) are a new product that claims to be governed by the RWA DAO in collaboration with the JustLend DAO. Tethers are invested by the DAO in various yield-generating assets in the real world and this yield is paid back to users.

Unfortunately, there are a few problems.

• Protos has been unable to identify any decentralized or autonomous organization associated with this project; as far as we can tell, the RWA DAO doesn’t exist.
• The JustLend DAO has no governance proposals or discussions we were able to identify related to the launch of stUSDT and the RWA DAO.
• There’s no disclosure provided on what assets this project is currently investing in.
• Around 85% of this token is held at Huobi, with much of the remainder held in addresses assumed to be Sun.

Read more: ‘Someone’ is spamming thousands of addresses with stUSDT

Poloniex won’t disclose reserves

An investor group that includes Sun owns Poloniex. Back in November, Poloniex promised to provide a Merkle Proof of Reserves to demonstrate that it holds the assets it’s supposed to. Unfortunately, this has yet to occur, though Poloniex claims it’s still in progress.

As mentioned above, Poloniex also holds the backing for WBTC on Tron, as well as other ‘Just Cryptos,’ but doesn’t provide the addresses where users would be able to verify those holdings.

Huobi’s confusing mix of assets

Sun is an advisor to Huobi and seems likely to be its majority owner.

Huobi previously promised that it would probe third-party verification of its ‘proof-of-reserves,’ but it hasn’t. When Protos reached out, it explained that “after the release of the relevant announcement, we have connected with a third party, but then no third party can do this. So there are no third parties.” 

Huobi has provided a Nansen dashboard, which it says shows the assets it holds. However, this dashboard raises additional concerns about the reserves. The exchange currently holds around $280 million worth of USDT; but it has much more stUSDT, totaling over $400 million.

Huobi claims to have 24,500 BTC, but unfortunately, 6,500 of those are WBTC on Tron, and no disclosure is provided on where those backing bitcoins are.

It was surprising that so many Huobi clients have apparently decided to convert their tethers into stUSDT and their bitcoin into WBTC, especially considering the problems surrounding both products.

DeFi protocols

SunSwap is basically UniSwap but on Tron. It’s governed by the SUN token, which currently has a market cap of roughly $50 million, according to CoinMarketCap. It’s not immediately clear how much of SUN Sun owns.

Similarly, JustLend is much like Compound but on Tron. It’s governed by the JUST token, which has a market cap of roughly $200 million, according to CoinMarketCap. Again, the precise amount of JUST Justin owns is not clear.

Then there’s JustStable. Similar to MakerDAO (but on Tron), it operates the USDJ stablecoin, which has a market cap of approximately $300 million. CoinMarketCap has shown that the token has consistently traded at a premium since FTX declared bankruptcy. 

Sun bought the company that played a role in developing the BitTorrent protocol so that he could use the name for a multi-chain cryptocurrency bridge. This protocol is connected to the BTT token, which has a current market cap of around $440 million. This is down from a high of $2.6 billion.

An SEC lawsuit against Sun alleges that he engaged in wash trading and market manipulation of the BTT token, which they allege is a security. Again, it’s not immediately clear how much BTT Sun owns.

Read more: SEC sues Justin Sun over TRX, BTT, market manipulation

TrueUSD’s murky ownership

TrueUSD is a stablecoin that over the past year has seen its market cap more than double, from approximately $1.2 billion to somewhere in the region of $2.8 billion. This growth has been driven by new adoption, including Binance adopting TrueUSD as one of its zero-fee trading pairs.

Analysis by ChainArgos suggests that Sun was the single largest burner of TrueUSD.

Since Techteryx acquired TrueUSD in late 2020, there have been persistent rumors that Sun is its owner. However, it has regularly denied this claim. These denials have grown more complicated since the former CEO of TrustToken, now Archblock, has alleged in a pro se lawsuit that Sun attempted to acquire TrueUSD.

Additionally, it seems that there may be significant overlaps between the leadership of TrueUSD and other Sun-connected entities like BitTorrent.

Sun admits he’s a ‘partner market maker‘ for TrueUSD but has denied owning it. 

USDD’s nonsense design

USDD is basically Terra, but on Tron. It currently has a market cap of $725 million. The reserves for this $725 million are made up of $415 million worth of BTC and approximately $150 million worth of TRX. Additionally, its peg stability module contains about $240,000 worth of TrueUSD.

These reserves are notably less than the current market cap of USDD.

Roughly $725 million TRX sits in addresses described as ‘burning accounts.’ The Tron DAO Reserve considers these to be collateral for USDD, despite being burned. 

Burned TRX for USDD comes from those burning it in order to issue new USDD and seemingly could be re-issued if the partners wanted to redeem USDD.

The original version of the whitepaper said that by November 2022 it would release Tron v5, which would integrate USDD natively in a manner much closer to Terra, where anyone would be able to issue and redeem USDD for TRX.  

The current whitepaper has completely abandoned this plan and instead relies on the USDD partners.

Read more: Justin Sun’s stablecoin USDD quietly loses peg amid FTX chaos

Animoca Brands and NFTs

Sun was an investor in Animoca Brands, a large web3 and NFT company. Crunchbase lists this as an exited investment for Sun. 

He has also invested in a variety of notable NFTs, both directly and for the APENFT Foundation and the JUST NFT Fund. JUST NFT Fund focused on creating NFT records for existing high-value pieces of art, including a Picasso.

Conclusion

Sun is one of the most important figures in crypto, with fingers in numerous pies. He has exchanges, stablecoins, layer-1s, market-making firms, and a litany of protocols named after himself. This broad involvement has attracted attention, as Sun has been accused of market manipulation by the SEC and many of his holding fail to provide promised transparency, raising questions about how assets have been stored and used.

Quotes in bold are our emphasis. Got a tip? Send us an email or ProtonMail. For more informed news, follow us on Twitter, Instagram, Bluesky, and Google News, or subscribe to our YouTube channel.

The post Where is Justin Sun’s money? appeared first on Protos.

Staked Tether (stUSDT), a product that promises to pay yield on tethers in return for investing in them and real-world assets, is almost completely controlled by Justin Sun-connected wallets and entities.

stUSDT claims to be governed by an entity called the Real World Asset Decentralized Autonomous Organization (RWA DAO), however, as mentioned previously, Protos couldn’t find any decentralized or autonomous governance structures related to this protocol.

The product’s website states that it was launched in partnership with JustLend DAO, but Protos was unable to identify any proposals or discussions in JustLend related to the launch of RWA DAO.

This seemingly non-existent DAO ostensibly takes the tethers staked by users and invests them in projects and assets in the real world as decided by the DAO. It then pays the returns back to stUSDT holders.

stUSDT does not currently have details of any of the investments it has made for this project.

Where are the stUSDT?

stUSDT has launched on both Tron and Ethereum, and holdings are intensely concentrated on both chains.

On Tron, there are currently approximately 436 million stUSDT, with ~92% of those tokens held at TDToUxX8sH4z6moQpK3ZLAN24eupu2ivA4, a Huobi address. Much of the remainder, ~7% of the total, is held in an address believed to be controlled by Justin Sun.

Huobi’s asset dashboard shows that stUSDT makes up approximately 13% of the total assets held by that exchange, significantly exceeding the quantity of non-staked tethers on Huobi.  

Currently, approximately 25% of the bitcoin held on Huobi is also in the form of WBTC on Tron, a product that has failed to provide any information on where the corresponding backing is for the token.

Huobi promised in November that within 30 days it would begin providing proof-of-reserve reports with a third party. No third party has provided confirmation of these balances, and Huobi customer service previously clarified to Protos that “after the release of the relevant announcement, we have connected with a third party, but then no third party can do this. So there are no third parties.”

Huobi appears to be owned at least in part by Sun. This means that approximately 99% of the total supply on Tron is controlled by Sun and Sun-connected entities.

Read more: Crypto exchange Huobi says two-year data breach wasn’t that bad

On Ethereum, there are currently approximately 72.5 million stUSDT, with ~72% controlled by 0x176F3DAb24a159341c0509bB36B833E7fdd0a132, an address tagged ‘Justin Sun 4’ on Etherscan. The entirety of the remainder, minus ~3 tokens, is controlled by 0x9FCc67D7DB763787BB1c7f3bC7f34d3C548c19Fe, an address that has received tethers and TrueUSD from Binance. The address has also provided liquidity to PancakeSwap on Ethereum and lent TrueUSD on Aave.

Why does it matter?

This project claims to be a DAO, but no DAO can be found. This project claims to be investing in ‘real world assets,’ but no disclosure is provided on those assets. In the meantime, Sun and related entities are in control of almost all of this token’s supply.  

For Huobi, the amount of this stUSDT significantly exceeds USDT, raising fears about the use of customer assets and highlighting how Sun uses a variety of protocols, entities, projects, and wallets in confusing money flows that lack true transparency.

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Days before FTX declared bankruptcy, Justin Sun signaled his intent to make sure that both Poloniex and Huobi would complete a proof-of-reserves process. Poloniex even describes this process as an “audit.” 

However, despite these assurances, Protos was unable to find any proof of reserves anywhere for Poloniex. For its part, Huobi provided a ‘Work Report on Asset Transparency’ in November and said another was coming with a third party within 30 days, however, it’s not clear to us exactly which third party is providing the promised confirmation. Several months later, it also made an interface available for users to “confirm” their own balances.

Huobi customer service provided a response to our question where they clarified that “after the release of the relevant announcement, we have connected with a third party, but then no third party can do this. So there are no third parties”.

Protos has reached out to Poloniex to verify the status of its proof-of-reserves and we’ll update if we hear back.

Huobi’s reserves have been a matter of some concern since people highlighted a decrease in bitcoin, but Huobi was quick to point out that it had thousands of BTC currently on the Tron network.

Read more: Justin Sun and Huobi play shell game with ownership

WBTC on Tron is a product offered by Poloniex that allows users to get a wrapped bitcoin token created by Justin Sun. The CoinMarketCap description for this coin says “The reserve addresses are published for anyone to audit.”

Protos reached out to Poloniex customer service in an attempt to determine the addresses for WBTC on Tron but we were told that because we were not Poloniex customers, they were not able to help us with that type of information. We’ve attempted to reach out to Poloniex through other means and again will update if we hear back.

Currently, this project self-reports having 25,000 bitcoins to CoinMarketCap, primarily held by Huobi and Poloniex.

Sun-connected exchange Poloniex offers a product on the Sun-built network Tron that represents a meaningful portion of the current bitcoin reserves for the Sun-connected exchange Huobi without any disclosure of the location of the reserves backing the product.

Update 2023-07-20 14:12: Added comment from Huobi about their lack of third party verification of Proof-of-Reserves.

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The post Poloniex proof-of-reserves and WBTC backing missing appeared first on Protos.

Staked Tether (stUSDT) is a token recently launched on Tron that claims to offer the ability to “unlock yields in real-world assets.” Users can deposit their TRC-20 USDT on the platform and then receive yield from the efforts of the stUSDT platform, which uses the USDT to ‘invest’ in assets. Currently, there’s about $213 million stUSDT — $180 million of which is held on Huobi. 

stUSDT is a rebasing token that pays users with additional tokens to represent their yield from the investments; it’s currently paying a “welcome campaign” APY of 10%.

At press time, the website doesn’t list any of its investments. Purportedly, these are managed by the ‘RWA DAO,’ though Protos was unable to identify any decentralized and autonomous structure governing this platform. This is done in collaboration with the JustLend DAO, another Tron-based project, as part of a ‘custody agreement.’ Once again, we were unable to find any details about this custody agreement or partnership with RWA DAO in the forums for JustLend DAO. Protos has reached out to stUSDT for clarification.

Justin Sun, the creator of Tron and “advisor” to Huobi, has compared stUSDT to a money market fund offered by Alibaba.

Read more: Gambling with Tether: Ultimate Bet, USDT perps, Tron bets, and the $1 peg

As part of a recent dispute over the amount of Bitcoin it held, Huobi published a press release directing people to a Nansen dashboard to show the assets it currently purports to hold. It revealed that Huobi currently has approximately $180 million in stUSDT, representing 85% of the total supply of stUSDT.

Huobi, “advised” by Sun, was the first to announce trading for this new Tron-based product.

Sun has a long history with Tether and is one of the largest single issuers of tethers. As of November 2021, he was responsible for issuing in excess of $200 million in USDT and was the first ever recipient of Tron-based tethers.

It remains unclear which assets stUSDT is invested in, how the ‘DAO’ is supposed to function, or why so much of this “decentralized” project has ended up at an exchange so intimately tied to the creator of JustLend and Tron.

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Justin Sun, no longer doing business as a Chinese citizen, has been establishing a slew of businesses in Hong Kong under his St. Kitts and Nevis identity and has kept his Huobi ownership at arm’s length.

Sun had previously used his Chinese passport to start companies — including one called Rebo Group Limited and another called Rible Group Limited — through 2014 but has relied on his new Caribbean identity since at least 2019.

Under this new identity, he’s started companies called ‘Love Letters Limited,’ and, in nods to Ayn Rand, ‘Objectivists Limited’ and ‘Only Fountainhead Limited.’ It’s unclear what the purpose of the shell companies is, though all three were established in April 2019.

Meanwhile, a saga is ongoing between the former founders of Huobi and the Sun-controlled entity, with the former founders suggesting that the continued use of the name is in violation of an agreement made when it was purchased from them.

As a result, they’re threatening to take legal action against the company. An online note has been circulating since late May, stating that New Huo Tech and its parent company HBIT have no affiliation with Huobi.

Read more: Who really owns crypto exchange Huobi?

Corporate shells and subsidiaries a ‘red flag’

It’s unclear why Sun has been registering all of his newer companies under a Caribbean passport, but the change seems to suggest that he may have lost his Chinese citizenship altogether.

While stating that it’s normal for large, international corporations to have numerous shells, subsidiaries, and sister companies, a lawyer familiar with the matter also called Sun’s antics “clear obfuscation,” stating that Huobi’s corporate structure is “highly irregular” and said that “the lack of the most basic corporate formalities is the real red flag here.”

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In early October 2022, right before the collapse of FTX, a mostly unheard-of Hong Kong-based investment firm, About Capital Management (ACM), announced that it had acquired China-based crypto exchange Huobi.

It soon became clear that the mysterious party responsible for acquiring the exchange was, in fact, none other than TRON and Poloniex founder Justin Sun. In hindsight, the clues were there, from his persistent tweeting about the company to his appointment to the Huobi Global Advisory Board.

However, Justin continues to deny any controlling ownership, instead stating that he’s an investor who merely helps to run things. So, the question remains: Exactly who owns Huobi and what’s the plan for the exchange?

Read more: Huobi monetizes FTX collapse with opaque debt token

Corporate documents answer nothing

Protos acquired Hong Kong corporate documents for numerous Huobi and Justin Sun-related entities, along with information about ACM. None of the documents point to who or what entity currently holds a controlling interest in the company.

In May, Protos reached out to ACM to ask about the acquisition and was told in no uncertain terms that the firm was “no longer involved with Huobi in any way.” The company refused to elaborate further.

HBIT (the company that represents Huobi under its FINCEN registration) saw a new director appointed in February. The individual in question goes by the name Wang Shuchi and their only digital footprint appears to be as the director of numerous shell companies and owner of Huobi Digital Limited.

This could very well be around the time that ACM wiped its hands of Huobi and Justin Sun.

Update 13:45 UTC: Reference to New Huobi Technology Holdings Limited was removed. This company is associated with the former owners of Huobi, not Justin Sun.

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The post Who really owns crypto exchange Huobi? appeared first on Protos.

Tron founder and Poloniex investor Justin Sun is continuing to pad his colorful crypto industry resume, this time turning his attention to once-giant Chinese crypto exchange, Huobi.

The exchange recently confirmed a long-standing rumor that Sun holds a leadership role at the company. Last year, Huobi hid Sun’s involvement behind the name of Huobi’s equity suitor, About Capital Management.

Justin Sun hopes Hong Kong will improve Huobi’s brand

Sun now has an interest in cleaning up Huobi’s reputation after the collapse of its $1 stablecoin, HUSD, which now trades below $0.14. Huobi also laid off hundreds of employees and demanded that remaining workers accept their salaries in USDT or USDC rather than fiat currency.

Worse, the company demonstrated an apparent inability to stop North Korean hackers from laundering 1,225 illegally obtained bitcoin through its platform. Those attackers then swapped the assets between different blockchains, including Sun’s Tron and BitTorrent blockchains.

To start, Sun is renewing a commitment to diversity, claiming that Huobi plans to hire more women.

Huobi is also adding additional support for Tether assets (Sun is one of Tether’s largest personal clients). In December 2022, Tether announced listings for two more tokens: Tether Gold and Euro Tether.

Read more: SCOOP: Tether personally issued TRON’s Justin Sun at least $200M in USDT

In addition, Sun announced that he’s moving to Hong Kong. He mentioned plans to employ Huobi and Tron workers in Hong Kong amid renewed Chinese interest in digital assets. Sun then reiterated the obvious ties between Chinese regulators and Hong Kong’s digital asset industry.

Justin Sun and Huobi seem interested in establishing closer ties between Tether and Hong Kong. Tether clients might simply need another ally or liquidity venue, and Huobi is one of the few exchanges that retain banking relationships in areas of interest to Chinese people in places like Hong Kong.

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Since Justin Sun of Tron (TRX) fame became a Huobi Global Advisory Board member, the exchange has been embroiled in a number of controversies. Among them is the fact that, for months, Huobi refused to say exactly how Sun was involved in its acquisition by the opaquely-named About Capital Management.

As you’d expect, rumors swirled that Sun backed the acquisition, which would have explained his quick appointment to Huobi’s Global Advisory Board.

Huobi remained quiet about the situation until a statement issued on January 19, 2022, confirmed that he had indeed assumed a leadership role in the company. Previously, Sun had only admitted to holding “tens of millions” of Huobi’s native HT token, which would have given him a significant interest in the future success of the exchange even without being a secret stakeholder in About Capital.

Then last week, for the first time, Huobi finally admitted that Sun helps run the company and is a major stakeholder.

Huobi’s many mysteries: Chinese operations, layoffs, and censorship

Huobi remaining tight-lipped about its leadership isn’t all that surprising. After all, the company’s operations have often been mysterious. Indeed, it served Chinese users for years despite the country’s repeated bans on crypto trading, and became, along with OKEx and Binance, one of China’s largest exchanges. All this while denying it operated in China.

Recently, Huobi issued a series of lackluster apologies addressing some of the rumors surrounding it. However, the curious press release did little to quell the doubts. Full of grammatical errors and non-standard English phrasings, the press release sounded like Huobi simply writing its own version of events.

• It denied muting internal communications channels for employees.
• It downplayed layoffs, which it claims didn’t reach exceptionally high levels for crypto companies during the bear market of 2022.
• The firm denied having improperly banned customer accounts, instead claiming that it merely froze those that engaged in improper behavior that it described as ‘rat trading.’
• Huobi alleged that these ‘rat trading’ accounts traded at abnormal times, rapidly transacted in new listings on Huobi’s exchange, and made larger-than-normal profits that they quickly withdrew. Huobi claims it will crack down on rat trading under its new management.

Read more: Justin Sun confirms 20% staff cuts at Huobi amid insolvency rumors

The curious case of Huobi’s own stablecoin

In late October 2022, Huobi’s dollar-pegged stablecoin HUSD cratered after the exchange delisted it. Huobi’s announcement indicated that it would continue to honor HUSD’s 1:1 exchange rate for Tether (USDT).

Although it didn’t give an exact reason for delisting its own stablecoin, Huobi cited Article 11 of its own Global Token Management Rules. This allows the regular review of progress made by the token issuers, security reviews of the project’s code, and consideration for a project team’s commitment to lock up their token holdings or change team members.

About Capital’s acquisition of a majority stake in Huobi could mean that Huobi’s priorities changed and that it followed its rules for token listings despite having created HUSD in 2018.

Of particular note, Justin Sun is also close to three other stablecoins: USDT, USDD, and USDJ. Both USDD and USDJ have already lost their $1 peg. It’s possible that Sun didn’t have confidence in maintaining HUSD’s peg. For this reason, he might have delisted it to avoid embarrassment. Indeed, HUSD’s peg has ultimately failed.

Read more: Justin Sun’s stablecoins are melting

Will Justin Sun help Huobi return to its former glory?

Justin Sun has a penchant for acquiring old assets in the hopes of reviving them. He purchased BitTorrent, yet did little more for the protocol other than add the BTT token for liquidity. He purchased the once-famous Poloniex exchange which never recovered its glorious trading volumes. Now he’s purchased Huobi in the hopes of surpassing the trading volumes that it previously accomplished while skirting Chinese regulations.

In summary, Huobi’s explanation for past controversies raises more questions than answers. It sounded more like it was giving its side of the story. Perhaps it hoped that finally admitting to Sun’s leadership role in the company would make its corporate vision more believable.

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