KuCoin, a cryptocurrency exchange, has seen a significant decline in market share, dropping from about 6.5% to less than 3% due to large outflows of funds. This decline follows lawsuits filed against the US Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) on March 26. Customers of KuCoin have been transferring their funds to other centralized exchanges like Binance, Coinbase, Gate.io, OKX, and MEXC, which they perceive as safer options. Market makers leaving the exchange and customers transferring funds to their own self-custodial wallets have contributed to this outflow of funds. Outflows from KuCoin wallets, mostly in USDT and ETH, were estimated to be over $600 million on March 26, exceeding inflows.
Data from Nansen revealed that on March 27, KuCoin had recorded outflows of over $842 million on Ethereum and $938 million on Ethereum-Virtual Machine (EVM) chains from an initial storage of $6 billion. The exchange has been experiencing a significant drop in assets held due to these outflows. However, it is important to note that the inflows and outflows only included on-chain transactions between the platform and other exchanges or wallets, not transactions between KuCoin addresses. The decline in KuCoin’s market share began on March 26 after lawsuits from the US DOJ and CFTC over violations of anti-money laundering laws and the operation of an illegal digital asset derivative exchange. KuCoin and its founders were accused of money laundering in the DOJ’s allegations.
KuCoin had claimed to have no customers in the United States, but investigations revealed that the platform served a substantial American user base, violating anti-money laundering regulations. The exchange was accused of intentionally ignoring U.S. know-your-customer (KYC) and AML requirements. KuCoin processed over $3 million from the sanctioned crypto mixer, Tornado Cash, between August and November 2023. Despite these allegations, KuCoin has maintained that its platform is secure and operational, denying any wrongdoing. The indictment led to panic among KuCoin customers, resulting in a mass withdrawal of funds from the platform which slowed down withdrawal times.
To address the congestion during withdrawals, KuCoin announced a $10 million airdrop program for affected customers, as well as future aid for users who were unable to withdraw their assets. However, despite these efforts, customers continued to withdraw their funds, leading to a significant outflow of assets from KuCoin and further decline in market share. The exchange has emphasized that it respects the laws and regulations of various countries and adheres to compliance standards. KuCoin has stated that the assets of its users are safe and that it is currently investigating the details of the allegations through its legal team. The exchange has denied any wrongdoing and remains operational amidst the legal challenges it is facing.
