Since Justin Sun of Tron (TRX) fame became a Huobi Global Advisory Board member, the exchange has been embroiled in a number of controversies. Among them is the fact that, for months, Huobi refused to say exactly how Sun was involved in its acquisition by the opaquely-named About Capital Management.
As you’d expect, rumors swirled that Sun backed the acquisition, which would have explained his quick appointment to Huobi’s Global Advisory Board.
Huobi remained quiet about the situation until a statement issued on January 19, 2022, confirmed that he had indeed assumed a leadership role in the company. Previously, Sun had only admitted to holding “tens of millions” of Huobi’s native HT token, which would have given him a significant interest in the future success of the exchange even without being a secret stakeholder in About Capital.
Then last week, for the first time, Huobi finally admitted that Sun helps run the company and is a major stakeholder.
Huobi’s many mysteries: Chinese operations, layoffs, and censorship
Huobi remaining tight-lipped about its leadership isn’t all that surprising. After all, the company’s operations have often been mysterious. Indeed, it served Chinese users for years despite the country’s repeated bans on crypto trading, and became, along with OKEx and Binance, one of China’s largest exchanges. All this while denying it operated in China.
Recently, Huobi issued a series of lackluster apologies addressing some of the rumors surrounding it. However, the curious press release did little to quell the doubts. Full of grammatical errors and non-standard English phrasings, the press release sounded like Huobi simply writing its own version of events.
- It denied muting internal communications channels for employees.
- It downplayed layoffs, which it claims didn’t reach exceptionally high levels for crypto companies during the bear market of 2022.
- The firm denied having improperly banned customer accounts, instead claiming that it merely froze those that engaged in improper behavior that it described as ‘rat trading.’
- Huobi alleged that these ‘rat trading’ accounts traded at abnormal times, rapidly transacted in new listings on Huobi’s exchange, and made larger-than-normal profits that they quickly withdrew. Huobi claims it will crack down on rat trading under its new management.
Read more: Justin Sun confirms 20% staff cuts at Huobi amid insolvency rumors
The curious case of Huobi’s own stablecoin
In late October 2022, Huobi’s dollar-pegged stablecoin HUSD cratered after the exchange delisted it. Huobi’s announcement indicated that it would continue to honor HUSD’s 1:1 exchange rate for Tether (USDT).
Although it didn’t give an exact reason for delisting its own stablecoin, Huobi cited Article 11 of its own Global Token Management Rules. This allows the regular review of progress made by the token issuers, security reviews of the project’s code, and consideration for a project team’s commitment to lock up their token holdings or change team members.
About Capital’s acquisition of a majority stake in Huobi could mean that Huobi’s priorities changed and that it followed its rules for token listings despite having created HUSD in 2018.
Of particular note, Justin Sun is also close to three other stablecoins: USDT, USDD, and USDJ. Both USDD and USDJ have already lost their $1 peg. It’s possible that Sun didn’t have confidence in maintaining HUSD’s peg. For this reason, he might have delisted it to avoid embarrassment. Indeed, HUSD’s peg has ultimately failed.
Justin Sun’s stablecoin USDD quietly loses peg amid FTX chaos
Read more: Justin Sun’s stablecoins are melting
Will Justin Sun help Huobi return to its former glory?
Justin Sun has a penchant for acquiring old assets in the hopes of reviving them. He purchased BitTorrent, yet did little more for the protocol other than add the BTT token for liquidity. He purchased the once-famous Poloniex exchange which never recovered its glorious trading volumes. Now he’s purchased Huobi in the hopes of surpassing the trading volumes that it previously accomplished while skirting Chinese regulations.
In summary, Huobi’s explanation for past controversies raises more questions than answers. It sounded more like it was giving its side of the story. Perhaps it hoped that finally admitting to Sun’s leadership role in the company would make its corporate vision more believable.