Fraud allegations against crypto exchange Huobi

Allegations have been circulating on the web in recent days against the crypto exchange HTX (formerly Huobi) regarding alleged fraud.

At present there is no confirmation that this is indeed fraud, but the allegations are more than one.

Decimated’s accusation of crypto fraud against the Huobi exchange

The online game Decimated has published a detailed account of what allegedly happened.

In October last year they announced a partnership between FractureLabs and Huobi.

Now Decimated claims to have had problems withdrawing funds from their account on Huobi, so much so that they were forced to seek the advice of a law firm.

Indeed, they even invite community members to email helpful information about this, particularly regarding any problems with withdrawals on Huobi.

They also cite Huobi’s recent restructuring, changing its name to HTX, and moving its headquarters to the Caribbean.

On Linkedin, Decimed CEO Stephen Arnold revealed that HTX (formerly Huobi Global), acquired by About Capital Management, has blocked about $5.8 million of their funds.

He claims they would be violating a settlement agreement to release their funds, and have not responded to arbitration or attempts by their legal department to contact them about it since January 2023.

He adds that they are also already aware of some similar situations, with funds blocked or in litigation for $200,000, $800,000, $10 million and in one case as much as $24 million.

The Thomson Reuters indictment

Thomson Reuters senior editor Rachel Wolcott on Linkedin rehashes the allegation.

In fact, she reveals that HTX (also known as Huobi Global) has been removed from the Seychelles business registry at the behest of the local financial regulator.

It also claims that U.S. law enforcement agencies would have a “law enforcement interest” in Justin Sun.

Justin Sun, in fact, is the figurehead of HTX.

Yesterday, for example, he tweeted about a hacking attack on HTX and Heco Cross-Chain Bridge, claiming that HTX will fully compensate for the losses of its hot wallet.

Deposits and withdrawals have been temporarily suspended.

Wolcott also claims that the corporate structure and ownership of Huobi/HTX is opaque, although Justin Sun himself is certainly behind it.

Even more serious allegations of crypto fraud: Huobi as FTX?

Some allegations that are circulating turn out to be even more serious, although they come from decidedly less reliable sources.

Indeed, some are speculating that the above hack may not have been a fluke.

The parallel is with FTX, or Mt.Gox, i.e., crypto exchanges that were forced to file for bankruptcy due to no longer having enough funds in the till to meet customer withdrawal requests.

In the case of Mt.Gox the hack was real, and the theft of Bitcoin was the direct cause of the bankruptcy.

In the case of FTX, on the other hand, the cause was a different one, and the theft is suspected that it may not even have been done from the outside.

Some speculate that the case of HTX may resemble that of FTX.

The operations of HTX

Nevertheless, although deposits and withdrawals have been temporarily suspended on HTX, the crypto exchange’s operations do not appear to have been compromised.

Justin Sun for example bragged today on X that Tether has issued another billion USDT on Tron network.

Tron and HTX are two separate things, but Justin Sun is always somehow behind it.

The Tron network is now the most widely used network to transfer USDT, as transactions are fast and especially cheap, while remaining on-chain.

So in theory the situation to date would still seem relatively quiet, provided HTX rehabilitates withdrawals once the hack is resolved.

The exchange has run into similar problems before, and so far has always come out of them. However, this does not necessarily mean that it will come out in perfect health this time as well.

The doubts

It should also be added that doubts have long been circulating about Justin Sun’s actions.

So far there is no record that he has ever had any serious problems with the law, but this could also be said for Changpeng CZ Zhao until a few days ago.

It should be noted that Sun in 2021 was appointed Ambassador and Permanent Representative of Grenada to the World Trade Organization (WTO). He had reduced his crypto commitments after this appointment, so much so that he resigned as CEO of Tron, but in March this year he stepped down, and returned to focus on the crypto sector.

Grenada is located in the Caribbean, which is where HTX’s registered office was relocated.

A charge by the U.S. SEC of selling unregistered security, specifically Tron’s TRX cryptocurrency and BitTorrent’s BBT token, hangs over his account.

It is therefore possible that the situation is still evolving.