Justin Sun’s HTX has messed up reserves
HTX, the Justin Sun-owned cryptocurrency exchange, has an unusual set of reserves that raise serious concerns about its management and how it uses user funds.
Indeed, according to Protos’ analysis, many of the HTX’s assets aren’t what users would expect, but are often either strange tokenized variants or many are lent out and not actually stored on the exchange.
For example, as of the beginning of December, there were supposedly more than 20,000 bitcoins (BTC) worth $1.8 billion on the exchange.
However, the majority of this wasn’t native BTC. Instead, it was what HTX refers to as BTCTRC20.
This is a tokenized version of BTC that’s issued on the Sun-founded Tron blockchain. However, this isn’t a version that people use frequently, like Sun-advised Wrapped Bitcoin.
Instead, this version is a Sun special issued by Poloniex.
What makes this massive portion of the reserves worth nearly a billion dollars even more problematic is that we don’t know where the BTC meant to collateralize it is stored.
Presumably, it’s held by Poloniex, but Poloniex itself was unwilling to disclose to Protos where the collateral for the token is held.
Furthermore, the token would make up approximately 98% of all BTC disclosed in the Poloniex proof of reserves, leaving very little for Poloniex customers.
However, BTC isn’t the only asset with problems. Indeed, the situation with Ethereum is also dire.
At the beginning of December, less than 9% of all ether (ETH) that was supposed to be in the reserves was actually native ETH.
Every month since December 2024, the native ETH has been a minority, with the remainder being either lent on Aave or in the form of staked ETH from Lido.
Adding to this strangeness, the total amount of ETH on exchange has fallen approximately 70% since its peak in May of last year.
Things are no better for stablecoins
There’s a similar issue with HTX’s most important stablecoin, tether (USDT).
Very frequently, almost all the USDT on exchange isn’t native but is instead lent out, especially on Aave and the Sun-founded JustLend.
In December, there was approximately 1.78 billion USDT on HTX, but 1.44 billion of that was lent out on Aave with an additional 96 million on JustLend. An additional 18 million was lent as Sun-founded Staked Tether, which also lends its tokens through Ave.
As of this most recent update, only 12% of the USDT on the exchange is actually native.
USDC, the stablecoin issued by Circle, which owned Poloniex before selling it to Sun, shows many of the same problems as USDT, albeit on a smaller scale.
More than half of the $53 million USDC on the exchange, totaling over $30 million is currently lent on Morpho.
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