‘Risk has changed’: HTX moves $1.3B reserves to third-party amid sanctions

Justin Sun-owned crypto exchange HTX (formerly Huobi Global) has reportedly moved $1.3 billion worth of reserve funds to an undisclosed ‘third party.’

According to HTX’s latest Proof of Reserves report, 1,719 Bitcoin [BTC], or roughly 8% of its reported 20,922 BTC reserves, were held with the third party. For Ethereum [ETH], 76,515 ETH from its reported reserve holdings were also transferred to the custodian.

Similarly, 99% of its $238M USDC was transferred to the same undisclosed custodian. Additionally, $819M of its $906M USDT reserves was also sent to the third party.

Collectively, these transfers and other assets bring the ‘third party’ holdings to $1.3B. 

HTX was recently sanctioned by the U.K government for allegedly helping Russian entities move capital. 

Why did HTX move reserve assets?

Commenting on the HTX move, prominent security researcher Taylor Monahan said, 

Risk has changed for HTX due to the sanctions, which means that govt overreach is now a bigger threat than, say, getting hacked.

In short, the move was likely to safeguard legit users from having their funds frozen. In fact, even the renowned Web3 investigator ZachXBT said the U.K crypto sanctions were ‘a bit of an overreach.’

According to him, the U.K government left a $1.2B legit laundering case but went for a blanket ban of innocent Asian retail users on HTX.  

Notably, Binance, Bybit, OKX, and now Hyperliquid have begun banning addresses that had any transfers linked to the HTX exchange. According to community members, it seemed that exchanges were now targeting the whole HTX user base, whether users are innocent or not. 

Although some criticized the exchanges, including Hyperliquid for the bans, others supported these restrictions. The supporters claimed that if Hyperliquid does not act now, it will likely be sanctioned too. 

This means that even innocent users’ funds can be automatically frozen until the compliance issue is resolved. In fact, such cases will get out of hand with the ‘super-app’ vision being pushed by most crypto platforms.

Should users be concerned?

That said, HTX noted that it still has 1:1 reserves for user assets. Besides, it ranked second in capital netflows in the past week despite the U.K. sanctions. 

Final Summary

• HTX reportedly moved $1.3B of its reserves to an undisclosed ‘third party’ custodian amid U.K sanctions 
• Hyperliquid has allegedly joined Bybit, Binance, and OKX in flagging HTX-linked transfers