HTX: Justin Sun\'s Exchange Faces Solvency Concerns as It Replaces USDT Reserves with Staked Tether (stUSDT)

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.

Justin Sun’s crypto exchange HTX has been accused of using customer assets to fund Sun’s projects and protocols.

A review of HTX’s proof-of-reserves reveals that a significant portion of the USDT on the exchange has been replaced with stUSDT, a Sun-connected project that purports to invest USDT into yield-generating activities like purchasing United States treasuries.

According to HTX’s proof-of-reserves, which it falsely describes as an audit, 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.

This is troubling because stUSDT is not a liquid asset and cannot be easily withdrawn from HTX. Additionally, the Real World Asset Decentralized Autonomous Organization, which is supposed to govern stUSDT, does not appear to exist.

When asked about this, HTX did not respond to a request for comment at press.

Another Sun-affiliated protocol, USDD, is also deeply connected to HTX. Despite describing itself as an ‘algorithmic stablecoin,’ there is no 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.

A review of the HTX proof-of-reserves reveals 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.

When asked about this, a representative for the TRON DAO Reserve told Protos that the TRX tokens in question are stored in a multi-signature wallet that is controlled by the TRON DAO Reserve. The representative added that the HTX address is used for "technical reasons" and that the assets are "fully controlled" by the TRON DAO Reserve.

However, the representative did not provide any further details on these "technical reasons" or explain why the HTX address is not listed among the other addresses that are involved in the TRON DAO Reserve multi-sig.

In addition to stUSDT and USDD, HTX is also storing a large amount of Wrapped Bitcoin on Tron (WBTC), a product that was offered by Sun-owned Poloniex. 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.

When asked about this, HTX did not respond to a request for comment at press.

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.

stETH cannot be directly withdrawn from HTX, and the ether that is bridged to HECO Chain is also not easily accessible to HTX users.

When asked about this, HTX did not respond to a request for comment at press.

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

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