Cash crunch at Huobi: Justin Sun announces layoffs
Huobi is reportedly facing payment problems.
Bitcoin exchange Huobi apparently has payment trouble. The issue came to light during the Silvergate Bank bank run.
Huobi, a exchange where Bitcoin and other cryptocurrencies are traded, appears to be in payment distress. Silvergate Bank is closely connected and also linked to the FTX exchange around Sam Bankman-Fried.
Silvergate Capital: shares plunge after bank run
What happened at Silvergate in the past few days can best be likened to a bank run. As Reuters reported on January 5, investors pulled more than eight billion US dollars from the bank. By drawing down assets, Silvergate shares fell 50% month over month.
The bank had announced it would cut staff by about 40%, or 200 workers. The company had recently sold $5.2 billion in debt at a loss of $718 million to stay liquid.
Reuters further reports that federal authorities' accounts have been seized. The latter is linked to the collapsed crypto exchange FTX. Silvergate is also said to have ties to FTX.
In addition, the crypto bank is facing allegations that it took insufficient precautions regarding anti-money-laundering guidelines. It is also closely tied to the Huobi Bitcoin exchange.
Huobi Bitcoin Exchange Enters Money Trouble
Huobi is currently one of the top 30 crypto exchanges by 24-hour trading volume. Justin Sun, who bought 30% of the exchange in October 2022, told Reuters today that the exchange plans to lay off 20% of its staff. Industry whispers suggest Huobi is cash-strapped as well, especially regarding the exchange's fiat reserves.
Meanwhile, Justin Sun allegedly shut down all internal communications channels according to a leaked document. Additionally, bonuses have reportedly been suspended, and salaries are apparently being paid only in the stablecoin Tether (USDT). The authenticity of the document could not be verified so far.
Crypto analysts at Arkham Crypto Intelligence have linked the Silvergate and Huobi events. The theory is Huobi ran into payment problems due to the Silvergate bank run and was forced to take these drastic measures.
Meanwhile, investigations by law enforcement against the Bitcoin exchange could worsen the situation. The exchange has long been accused of lax Know-Your-Customer procedures. Twitter user cipher_blade demonstrated in a self-experiment that it’s not just rumors. He dressed as Taylor Swift and Borat and passed the exchange's KYC check.
What this means for investors
In the crypto industry, this kind of news brings uncertainty: is the Huobi exchange facing the same fate as FTX? In principle, it isn’t smart to panic early or make emotional decisions in such situations. However, it’s important to monitor the situation and any developments closely.
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