Poloniex and the $1.3B bitcoin question

Justin Sun-owned Poloniex has announced fee-free trading for any user who enrols in its “Poloniex Super” membership, which currently offers 30 days’ worth of fee-free “spot, margin, and futures trading.”

Poloniex has yet to announce what this membership will cost once the 30-day period has elapsed, though it does mention that “[a]fter the trial period ends, you will be automatically enrolled in the basic Super plan by default.”

This product announcement has led users to ask how Poloniex will make money without fees. Sun quickly explained that Poloniex has no need to make more money because “we already made enough from the bitcoin ($BTC) we bought in 2012.”

Poloniex was founded in 2014 and therefore couldn’t possibly purchase any $BTC in 2012, so presumably Sun is referring to $BTC he purchased.

This statement that Poloniex can continue to operate based only on these profits brings to the forefront concerns about how Poloniex has managed the $BTC in its reserves.

In 2020 Poloniex offered a new product, which it described at different times as “$BTC on TRON” and “BTCTRON.”

This initial announcement described BTCTRON as “a type of wrapped $BTC token that exists on the TRON blockchain.”

Poloniex’s Help Center provides us the contract address for this token, TN3W4H6rK2ce4vX9YnFQHwKENnHjoxb3m9.

Reviewing this contract address reveals that this token currently has a circulating supply of 17,545 $BTC, worth approximately $1.3 billion.

Disturbingly, Poloniex’s so-called “proof of reserves” claims that Poloniex has a balance of only 11,090 $BTC in its entire reserves and 11,082 of those are “User Balance.”

This is insufficient to reserve this tokenized $BTC product.

Protos has previously repeatedly reached out to Poloniex during our past reporting on this product, and it has never been willing to provide the addresses that hold the $BTC for this tokenized product.

We attempted to reach out to Poloniex again; however, it didn’t provide these addresses before publication.

Read more: FTX estate says Justin Sun still owes it millions

Increasing the concern about this product is how deeply it has been integrated into another Sun-owned exchange, $HTX.

At $HTX, typically there is more of this mysterious BTCTRON product, which provides no transparency, than real $BTC.

As of the most recent $HTX snapshot, dated March 1, there were a total of 21,362 $BTC on $HTX. BTCTRON accounted for 10,291 of those.

There are also an additional 1,212 $BTC that are in the form of Sun-advised Wrapped Bitcoin.

What this means, taken as a whole, is that Poloniex will not disclose where the $1.3 billion in $BTC that is supposed to collateralize this product is located.

Yet despite that fact, $HTX is willing to make it a massive portion of its reserves, all while Sun claims that Poloniex can afford to offer “fee-free” trading because of the appreciation in the price of bitcoin.

Perhaps instead of making grandiose claims about the value of his $BTC, Sun should instead work on solving the apparent $BTC shortfall at the exchanges he owns.