KuCoin, a cryptocurrency exchange, has seen a dramatic reduction in its market share, halving in response to legal action taken by the United States Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC).
This decline came after the two bodies filed charges against KuCoin, causing a wave of panic among its users.
Many opted to withdraw their funds, leading to a noticeable decrease in trading volume and market share.
In the aftermath of these legal challenges, KuCoin reported a significant drop in the amount of cryptocurrency held in its reserves.
The exchange’s Bitcoin holdings diminished by 25% to 12,114 BTC, and its Ethereum reserves saw a 22% decrease to 112,000 ETH.
Additionally, the platform’s USDT balance fell by 22% to 963 million USDT. Over the course of a week, more than $843 million was withdrawn, reducing KuCoin’s balance from $4.3 billion to $3.2 billion as per data from DeFiLlama.
The daily trading volume also suffered, plummeting from $2 billion to $520 million, a reduction of nearly 75%.
This exodus of funds was not limited to individual users. Market makers too withdrew, transferring their assets to rival exchanges such as Coinbase, Binance, and OKX or moving them to on-chain wallets.
Amid these challenges, KuCoin CEO Johnny Lyu emphasized the company’s compliance efforts and its operational status quo.
The exchange also announced an $8.9 million airdrop in its native KCS token and Bitcoin to compensate users affected by withdrawal delays from March 26 to 28.
Lyu stated, “I understand the importance of user trust and satisfaction.
“To express our gratitude for your loyalty and patience during the withdrawal congestion, we’re launching this airdrop plan as promised.”
The charges levied against KuCoin by the DOJ involve the founders Chun Gan and Ke Tang in allegations of violating anti-money laundering laws, facilitating over $9 billion in laundering activities, and bypassing US AML and KYC regulations by falsely claiming to have no US customers.
An incident highlighted by the DOJ involved KuCoin deposit addresses receiving $3.2 million in cryptocurrency from the sanctioned currency mixer Tornado Cash between August 2022 and November 2023.
The CFTC’s accusations add to KuCoin’s legal woes, alleging unlawful operation of a digital asset derivatives exchange and seeking various penalties, including disgorgement, trading and registration bans, civil monetary penalties, and a permanent injunction against future violations.