- KuCoin has been slapped with criminal charges in the U.S.
- Following the indictment, exchange users have rushed to withdraw their assets.
- This article explains how the case affects you and what to do.
Following the collapse of FTX in November 2022, trust in centralized crypto exchanges remains significantly low, making it easy for users to panic at the slightest signs of cracks. In the latest instance, KuCoin is at the center of these concerns.
Following criminal charges from the U.S. DOJ for breaking money laundering rules, users have been left wondering whether their assets are safe on KuCoin.
In this article, DailyCoin intends to help users cut through the noise and separate fact from fiction.
Who is Affected By the KuCoin Case?
On Tuesday, March 26, the DoJ unveiled criminal charges against KuCoin and its founders, Chun Gan and Ke Tang. The two main complaints in the charges are that the exchange has served U.S. customers without the necessary licensing and failed to apply anti-money laundering requirements, consequently allowing illicit fund flows through the platform.
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As a U.S. case, U.S. exchange users are most likely to be affected. Depending on the resolution of legal proceedings, authorities will likely compel KuCoin to no longer grant them access to the platform. In this instance, KuCoin will likely offer users a deadline for withdrawing their assets.
Global users of the exchange, on the other hand, are unlikely to be affected.
Are KuCoin User Assets Safe?
In a Tuesday statement, KuCoin assured users that their assets were safe and that the DOJ case has not impacted operations.
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"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," the exchange wrote.
KuCoin’s statements assuring users of the safety of their assets have been corroborated by Ki Young Ju, CEO of crypto analytics firm CryptoQuant. In an X post on Wednesday, March 27, Young Ju asserted that the exchange “is fine.”
"On-chain wise, @kucoincom is fine. $BTC and $ETH withdrawals surged, driven mainly by retail users, with a small impact on the overall reserve. They appear to not commingle customers' funds and have sufficient reserves to process user withdrawals."
Further attempting to allay user fears, the analyst argued that compared to the now-bankrupt FTX, KuCoin’s outflows following the DOJ’s indictment appeared “organic.”
These assurances, however, have not stopped users from rushing to take their assets off the exchange, some of whom have reported significant difficulty.
Why Are KuCoin Withdrawals Being Delayed?
Following the news of KuCoin’s indictment, several users have reported unusually lengthy withdrawal times, and some have expressed concerns over the exchange’s solvency.
Despite these fears, delays are likely the result of the crypto exchange transferring assets to meet the rapid pace of user withdrawals. At the time of writing, Scopescan data shows that the exchange has processed $941 million in withdrawals in the past 24 hours.
Speaking with DailyCoin about the surge in withdrawals, Jonathan Solomon, co-founder of ARIA, a crypto analytics provider, suggested that it would likely serve as a “stress test” for the exchange to aid the management of future crises.
“The ongoing ‘bank run’ at Kucoin will inevitably test the exchange's resilience, acting as a real-time stress test to assess its financial stability and operational capability in managing such crises.”
What Can You Do if Your KuCoin Withdrawal is Pending?
In response to user complaints, KuCoin has urged users with withdrawals pending for over an hour to submit support tickets via official channels.
What Changes Will KuCoin Undergo Following the DOJ Indictment?
As it was in the case of Binance, following the recent DOJ indictment, KuCoin will likely have to pay a significant fine. At the same time, the firm will likely also have to implement stricter KYC and geofencing rules to ensure that U.S. users do not use their platform.
Commenting on the development, KuCoin CEO Johnny Lyu asserted that the exchange’s legal concerns were “typical” for emerging sectors.
On the Flipside
- The DoJ does not mention insolvency in its case against KuCoin.
- KuCoin faces separate civil action from the CFTC regarding similar concerns.
Why This Matters
Following KuCoin’s indictment in the U.S., a withdrawal panic has ensued, making it necessary for you to understand the facts of the case and how your funds are affected.
Read this for more on the KuCoin withdrawal concerns:
KuCoin Faces Withdrawal Panic as DOJ Files Criminal Charges
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