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insolvency

Justin Sun-Backed Huobi’s Days Numbered? Troubling Links Unmasked

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Crypto exchange Huobi is facing insolvency rumors as a result of $64 million in outflows on Aug. 5 and 6, following news that the company’s top executives are being investigated by Chinese authorities. The trading platform’s TVL has fallen by 20% as a result, going from $3.09 billion to $2.5 billion as of this writing.

Over the past two weeks, Huobi has lost at least one C-level executive, though it is unknown if the resignation is related to the Chinese probe. Then, on August 4, allegations surfaced claiming that one of its high-level execs had been detained in China as a result of the exchange’s alleged links with gambling firms.

Huobi representatives, on the other hand, have categorically disputed the accusations, calling them fake news and asserting that the exchange is “currently doing well.” Justin Sun, the founder of the TRON blockchain and the key adviser of the Seychelles-based trading platform, also released official remarks denouncing the rumors as “FUD.”

Adam Cochran, a crypto analyst and investor at Cinneamhain Ventures, originally made the doomsday predictions, stating that Huobi is “deeply insolvent” [based on statistics on USDT volumes on the exchange’s balance]. He said that the exchange’s balance is ten times lower than its client obligations and that it is steadily declining.

In addition, Cochran charged the TRON founder with fund embezzlement for allegedly supporting his other defi apps and providing a yield to encourage users to make additional deposits.

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Justin Sun-Backed Huobi's Days Numbered? Troubling Links Unmasked 2

“Justin Sun Prop Up DeFi Apps To Attract Huobi Deposits”

Just is using the same assets in Huobi, JustLend, Poloniex, and his other apps to enrich himself, and hoping users don’t withdraw or are not informed enough to hear of the issues. So users *think* they have balances of $631M, but there is only $90M there. The rest Justin Sun is using to prop up his other defi apps, and paying a yield on it to get users to deposit more into Huobi.

The analyst further argued that even Binance has resorted to selling Tether as a result of recognizing that Sun doesn’t actually have the USDT he claims to, and if users find out, they might mass dump to get off of his exchange.

“When Binance heard that Huobi/Tron employees were being investigated in relation to actions at the exchange, they started slamming the 3CRV USDT sell into DAI to mitigate their risk. Because Huobi is deeply insolvent.”

Gate.io Clarifies Its Liquidity Status After Insolvency Rumours

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Leading CEX Gate.io asserted that there are no issues with its operations or withdrawals in response to the widespread reports of illiquidity.

“First, we want to emphasize that Gate.io is an established and well-operated exchange. We remain committed to providing users with secure, efficient, and reliable digital asset trading services.”

In the blog post dated May 31, the crypto exchange stated that it is instead focused on its 10th-anniversary celebration and the launch of Gate Group’s Hong Kong trading platform, Gate.HK.

Gate.HK prioritizes compliance and has submitted an application for a Virtual Asset Service Provider [VASP] license to the Hong Kong Securities and Futures Commission, aligning with the latest regulatory requirements. 

The other day, crypto Twitter was flooded with numerous posts claiming that the exchange was bankrupt as a result of a purported relationship between it and the Web3 cross-chain router Multichain Multichain [MULTI] whose treasury is backed by 30%.

It all began after crypto tracking firm Arkham Intelligence revealed data indicating significant MULTI inflows to Gate.io, which it said was linked to rumors of the protocol’s team “allegedly being arrested in Shanghai.”

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Gate.io Clarifies Its Liquidity Status After Insolvency Rumours 4

Last week, numerous reports emerged that Chinese authorities allegedly took into custody several Multichain executives, including CEO Zhaojun.

Although the arrests were neither confirmed nor denied by officials, Binance responded by temporarily suspending several bridged tokens that relied on the Multichain protocol.

Then, on May 31, a statement from Multichain’s Twitter account claimed that the protocol had encountered numerous problems as a result of “unforeseeable consequences.”

The team said that despite their best efforts to follow protocol, they were “unable to reach” CEO Zhaojun in order to access crucial servers.

Gate.io Saw a $150M Outflow

Soon after, Twitter users posted transaction trails highlighting significant FTM deposits to the tune of over $10 million from unknown members of the Multichain team to Gate.io.

The identity of the account owner who executed the transaction is now yet unclear.

Due to the massive MULTI and Fantom deposits to Gate.io, numerous Twitter users speculated that the exchange was susceptible to Multichain fallout.

Users hurried to withdraw their assets, causing a $150 million net outflow on the centralized exchange as of right now. The Gate.io crew continued to put up a brave front, labeling the commotion as FUD.

Crypto Debit Card Issuer Wirecard Files for Insolvency

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Troubled fintech crypto debit card issuer, Wirecard, has allegedly filed an open insolvency proceeding. According to the Wall Street Journal ‘s report of 25 June, the Munich-based crypto card firm applied to the Munich District Court to initiate the insolvency settlement process.

The global Fintech firm cited its imminent insolvency and excessive debt as the chief encouragement for the application, referring to the $2.1 billion missing from its balance sheet. Situations have rapidly changed for the crypto debit card issuer after finding out that 32 percent of its balance sheet did not really exist.

 

Crypto debit card Issuer not yet bankrupt

Immediately after the discovery, Fintech became a leaderless company as the CEO and other top officials quit their positions. Wirecard ‘s insolvency application suggests that the company can not meet its liabilities for a short period of time. Insolvency may be the result of either a cash-flow deficit or a negative net asset balance. In the case of Wirecard, this seems to be the latter.

“The Management Board has come to the conclusion that a positive; going concern forecast cannot be made in the short time available. Thus, the company’s ability to continue as a going concern is not assured,” stated Wirecard.

As per the most recent financial filings in 2018, the Crypto Debit Card Issuer has a net profit of $350 million. However, as per the latest developments, investors might want to do a careful study on the figures. During the insolvency process; firms will typically implement radical policies to keep treading waters; such as scaling down staff and expenses, reorganizing debt, selling a section of their assets, and other measures. 

Bankruptcy vs. insolvency

Bankruptcy happens when a firm is completely incapable of meeting its debt obligations. Insolvency, on the other hand, is a precondition for bankruptcy. Insolvency does not suggest that the company has completely failed.

In conclusion, Wirecard ‘s business areas include the issuing of crypto payment cards to Cryptop.com and Tenx. According to a Tenx representative, client funds in fiat and digital currency have not been affected by the latest drama of the crypto debit card issuer.