Crypto Investors Exit KuCoin After Criminal Conspiracy Charges

Crypto Investors Exit KuCoin After Criminal Conspiracy Charges

Kaiko Research compiled blockchain data showing that customers are abandoning the KuCoin crypto exchange in droves.

This was after US government agencies filed back-to-back lawsuits against the crypto exchange.

The events

There has been a decline in both market share and trading volume of the KuCoin crypto exchange since March 26th, which has halted its progress as one of the fastest-growing platforms.

In a blog post, Kaiko shared that the daily volume of the crypto exchange has declined to $520 million from $2 billion. As for its market share, it has plummeted to 3% from 6.5%.

Last week, the KuCoin crypto exchange was accused of anti-money laundering (AML) violations by the Department of Justice (DOJ).

Meanwhile, the Commodity Futures Trading Commission (CFTC) also filed a lawsuit against the exchange for not registering its Ethereum margin trading service.

In the criminal complaint made last week, the crypto exchange was referred to as a multibillion-dollar criminal conspiracy by Darren McCormack.

He is the Acting Special Agent in Charge of Homeland Security Investigations’ New York Field Office.

The impact

Ever since then, crypto investors who had assets on KuCoin have begun to migrate their funds to its competitors, or to personal wallets.

Some of the exchanges that have seen an inflow due to this include, MEXC, OKX, Binance, and Coinbase.

The outflows from KuCoin surpassed the $600 million mark on March 26th alone, which was far higher than the inflows.

Many of the companies that saw inflows have also been subject to similar lawsuits by the government.

For instance, in November, shoddy AML and know-your-customer (KYC) procedures saw Binance fined by US regulators for $4 billion.

Both Coinbase and Binance are also facing charges of listing unregistered securities on their platform by the US Securities and Exchange Commission (SEC).

The reactions

However, it is important to note that it is not just the crypto industry that has become skeptical of the aggressive treatment of digital asset companies by regulatory bodies.

The judicial system has also become quite skeptical regarding the basis on which regulators continue to make accusations.

Last month, the SEC was criticized for its ‘bad faith’ and ‘gross abuse of power’ attacks by District Judge Robert J. Shelby.

This was related to the lawsuits that had been filed against Debt Box, but the regulator had not been able to provide evidence that the company was laundering funds of its investors offshore.

As far as KuCoin is concerned, Kaiko revealed that they had not come across any on-chain evidence to show that the exchange had interacted with Tornado Cash.

This is a crypto mixer that has been sanctioned and the DOJ claims that KuCoin had interacted with it.

But, the research firm disclosed that Tornado Cash was used for ‘privatizing’ the funds stolen in 2020 from the exchange.

The lawsuit filed by CFTC referred to cryptocurrencies like Litecoin (LTC) and Ethereum (ETH) as commodities.

This could offer a reprieve to investors concerned about these assets being classified as securities. Since then, Litecoin has seen a rise in its price.