Crypto Investors Flee KuCoin Following US ‘Criminal Conspiracy’ Allegations

According to blockchain data compiled by Caico Research, customers appear to have abandoned crypto exchange KuCoin en masse after receiving chargebacks from US government agencies.

As of March 26, KuCoin's trading volume and market share have both halted the progress of other crypto exchanges that have been growing rapidly. According to Kaiko in a blog post on Wednesday, KuCoin's daily volume dropped from $2 billion to $520 million, and its market share dropped from 6.5 percent to 3 percent.

Earlier last week, the Department of Justice (DOJ) sued KuCoin for anti-money laundering (AML) violations, and the Commodity and Futures Trading Commission (CFTC) sued the firm for failing to register its Ethereum margin trading service with the regulator.

In a criminal complaint filed last week, Acting Special Agent in Charge of the New York Field Office of Homeland Security Investigations Darren McCormack described KuCoin as an “alleged multi-billion dollar criminal conspiracy.”

Since then, crypto investors with assets on the platform have been migrating their funds to private wallets or rival platforms, including Coinbase, Binance, OKX, MEXC and Gate.io. On March 26 alone, the amount of income from the currency exceeded 600 million dollars, which is much higher than the income.

Many of the same companies have been charged with the same government. For example, Binance was fined more than $4 billion in November for US regulators shoddy know-your-customer (KYC) and AML procedures.

Both Binance and Coinbase are now facing charges from the US Securities and Exchange Commission (SEC) for listing unregistered securities on their respective platforms.

The crypto industry — and, increasingly, the justice system itself — has questioned regulators' handling of attacks on digital asset firms and the basis on which their charges are often filed.

Last month, U.S. District Judge Robert J. Shelby accused the SEC of “abuse of power” and “bad faith” in its lawsuit against DebtBox after the agency failed to provide evidence that the firm was siphoning off investors' money offshore.

As for KuCoin, Kaiko said it had no information about the exchange's interaction with Tornado Cash, an approved crypto mixer, according to the DOJ's claim.

“However, the funds stolen from the KuCoin hack in 2020 were ‘privatized' using Tornado Cash, representing a large amount of ETH,” the research firm said.

The CFTC's KuCoin lawsuit refers to cryptocurrencies including Ethereum (ETH) and Litecoin (LTC) as commodities, providing relief to investors who fear the assets could be classified as securities. Litecoin has seen a significant price jump in the days since then.

Edited by Andrew Hayward.