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HTX, formerly Huobi, offers a ‘proof-of-reserves’ process meant to help assure users that it has the assets they need to be a solvent exchange. At one point, it even claimed that a third party would verify the proof-of-reserves process before eventually admitting, “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.”
Unfortunately, and perhaps contributing to the lack of third parties, it appears that HTX has been including ‘collateral’ for the USDD algorithmic stablecoin in its reports.
HTX provides a software tool that intends to make it possible for third parties to verify that HTX has the assets it’s supposed to. The ‘snapshot’ was most recently updated for the beginning of December and included the Tron address, TZ1SsapyhKNWaVLca6P2qgVzkHTdk6nkXa.
friendly reminder to stay FAR AWAY from anything JustinSun related. There's tons of redflags and in the case of USDD he is FACTUALY commingling funds: TRX address TZ1… is both in the USDD backing and the Huobi reserves. https://t.co/kYOyycgos5 pic.twitter.com/8gSqn8SIOg
— Symbio (@NoCryptFish) January 10, 2024
This address is also listed as one of the “reserve accounts managed by the TRON DAO Reserve” for the USDD algorithmic stablecoin. This suggests that the assets in this address are being simultaneously counted as assets for HTX and collateral for USDD.
Further complicating this discussion is the claim that this account is “managed by the TRON DAO Reserve.” As we review the governance module for USDD, we can see only a single proposal that has ever been voted on, which doesn’t seem to provide for the collateral controlled by this DAO to be deposited at HTX.
stUSDT
Other problems in the Sun ecosystem manifest in the HTX proof-of-reserves, including the incredible quantity of stUSDT (staked tethers) it controls.
Justin Sun-advised Huobi controls 85% of ‘decentralized’ stUSDT
The vast majority of this Sun-controlled project ends up at HTX, with the remainder ending up in other addresses believed to be controlled by Sun. Furthermore, this raises additional concerns because approximately $402 million in stUSDT is included in the total balance of $475 million USDT on the platform, suggesting nearly 85% of all tethers on the platform are in this product.
The HTX Proof-of-Reserves suggests HTX holds approximately $475 million in assets against $470 million in user assets.
WBTC
Another problem in the HTX Proof-of-Reserves is the presence of WBTC on Tron in the proof-of-reserves. This product is offered by Sun-owned Poloniex; however, Poloniex previously told Protos it couldn’t disclose the Bitcoin addresses that hold the collateral for this token to us.
Nearly 45% of all Bitcoin on HTX is in this ‘wrapped’ form. Protos is unable to verify the backing. Currently, the proof-of-reserves suggests that HTX holds 21,842 BTC against 21,820 in user assets.
Poloniex proof-of-reserves and WBTC backing missing
Read more: HTX hacked week after Poloniex — now Justin Sun only posts as AI
These various Sun-connected products make up a significant portion of HTX’s reserves but raise serious questions about the quality and quantity of assets held at this exchange. These concerns are only heightened following a recent hack.
Protos has reached out to HTX to clarify why these assets are included in the proof-of-reserves.