Introduction
The drama continues one crypto exchange after another. If you have been around in the crypto space the last few days, you already heard about the criminal charges brought against Kucoin exchange and its founders by a US court. This is another chapter in the long list of legal actions taken by various countries against crypto exchange platforms.
In this particular criminal indictment, Kucoin co-founders Chun Gan and Ke Tang and the exchange were charged for breaking the Bank Secrecy Act. The indictment also included that they were operating money transmission services through Kucoin exchange without proper legal and official backing from the US authorities.
The US has thus accused Kucoin of being a channel through which so much illicit funds have been moved in and out of the US. According to the indictment, the crypto exchange has been sponsoring or assisting the movement of funds collected from illegal businesses. You can take a look below at part of the official indictment document:
As a money transmitting business and a futures commission merchant, KuCoin is required to comply with the applicable Bank Secrecy Act provisions requiring maintenance of an adequate AML program, including customer identity verification, or know-your-customer (“KYC”) processes. AML and KYC programs ensure that financial institutions, such as KuCoin, are not used for illicit purposes, including money laundering. source
The Indictment is contending that Kucoin was supposed to register with the appropriate US authorities and receive the license to operate a financial services business. They were also supposed to comply with legislation that would prevent use of the platform to move funds earned from illicit business. You can see another section of the indictment document below:
As a result of KuCoin’s willful failures to maintain the required AML and KYC programs, KuCoin has been used as a vehicle to launder large sums of criminal proceeds, including proceeds from darknet markets and malware, ransomware, and fraud schemes. Since its founding in 2017, KuCoin has received over $5 billion, and sent over $4 billion, of suspicious and criminal proceeds. Many KuCoin customers used its trading platform specifically because of the anonymity of the services it provided. In other words, KuCoin’s no-KYC policy was integral to its growth and success. source
Now, another big crypto business finds itself on the receiving end of legal actions which could threaten the growth of the business or its operation in the US. The indictment has certainly sparked big reaction from the millions of Kucoin users and indeed the entire crypto space.
FUD triggers Massive movement of funds from Kucoin
Following the announcement of the charges against Kucoin, the crypto community especially users that have funds with the exchange was thrown into panic. It was reported that whales and many prominent users quickly moved their funds from the exchange. The announcement certainly created massive FUD and it is understandable that users are afraid their funds might get stuck in the platform amid this legal battle that just started.
Kucoin users withdrew funds in excess of $1bn some hours after the announcement. The US has alleged that from the time Kucoin started operating in the country till now, they have processed more than $8b worth of funds of questionable transactions. The document accused Kuccoin of receiving up to $5b in funds and sending up to $4b.
While the panick created by this announcement has seen users quickly move more than $1b volume of digital assets, the exchange still has loyal customers and maintain $5b in funds held in various user wallets. While this development continues, it remains to be seen whether users will retain their trust and funds in the crypto exchange or more massive exodus might happen. How will the exchange rebuild trust and attempt to retain as much customers as they can? Here is how.
$10m Airdrop to reward Kucoin loyal customers
The leadership of Kucoin are certainly trying to be on top of the situation. With massive withdrawals taking place, it is important to hear from the management and reassure customers of the situation at hand. The exchange thus announced a $10m airdrop to all customers as an expression of goodwill especially to those that have stuck with the exchange in this trying times. Announcing the airdrop, Johnny Lyu who is CEO of kucoin said the following:
"I would like to express my gratitude to all KuCoin users for your support, trust, and companionship during the past few days and the past seven years. We will absolutely ensure the security of user assets as always and comply with regulations to fulfill our trust" source
For now, no one knows the details of the airdrop. But many are already speculating that it would be to reward cutomers that stayed behind and did not move their assets as FUD set in. Users were advised to stay tuned to more updates about the announced airdrop. Of course, Kucoin has already acknowledged the indictment in a X post to customers a day earlier. They mentioned that their legal team would respond to the issue appropriately. More important, they calmed down worried customers and dispelled any fears that the exchange will freeze assets due to prevailing circumstances.
KuCoin is operating well, and the assets of our users are absolutely safe. We are aware of the related reports and are currently investigating the details through our lawyers. KuCoin respect the laws and regulations of various countries and strictly adheres to compliance standards. source
Finally
This is a developing story and all in the crypto space would like to see how it ends. Will Kucoin leadership agree to a settlement, or will they simply close-up shop to US customers? Time will tell. Just stay tuned.
Note: Thumbnail is mine!