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KuCoin, a popular cryptocurrency exchange, saw a significant drop in its Bitcoin (BTC) reserve. In March, the BTC reserves fell by more than 25% month over month. This dramatic decline follows recent charges filed by the United States Department of Justice (DoJ).
KuCoin's Asset Reserves Decline Amid Legal Challenges and Market Shifts
According to KuCoin's most recent asset reserve certificate for March, the user's BTC assets totaled 12,114. This indicates a 25.4% decrease from the February value of 16,240 BTC. In addition, the exchange's Ethereum (ETH) assets fell significantly to 112,763. It represents a 21.91% decrease from 114,405 ETH in February, Coingape reported.
In addition, USDT assets, a stablecoin pegged to the US dollar, fell 21.5% to 963 million. Furthermore, the USDC reserve, another stablecoin, fell sharply by 33.62% to 39.34 million.
Following the consecutive announcements of lawsuits on March 26, Kucoin's trading volume and market share fell dramatically. Daily trading volume fell from around $2 billion to $520 million, despite KuCoin's attempt to alleviate the situation with a $10 million airdrop. According to Kaiko data, its market share has more than halved, from 6.5% to less than 3%.
Furthermore, Kaiko data shows that Kucoin users are transferring funds to alternative centralized exchanges such as Coinbase, Binance, OKX, MEXC, and Gate.io, regarded as safer alternatives. Some of the outflows can be attributed to market makers leaving the exchange. In addition to moving funds to other platforms, some users send their assets directly to their on-chain wallets.
On March 26, outflows from KuCoin wallets exceeded $600 million, significantly outpacing inflows. Most outflows were in USDT and Ethereum, reflecting users' concerns and desire to secure their assets in the face of the exchange's legal challenges.
KuCoin Faces Legal Action from DOJ and CFTC Over Regulatory Violations
Previously, KuCoin found itself in hot water last week when the Department of Justice (DOJ) accused it of violating anti-money laundering regulations. The CFTC filed a lawsuit over its Ethereum margin trading activities. Despite its rapid growth earlier this year, KuCoin is experiencing a significant exodus of traders from its platform.
The United States Department of Justice has filed charges against KuCoin Exchange and two of its co-founders, Chun Gan and Ke Tang. It accused them of violating numerous laws in their efforts to grow their trading platform into one of the largest in the emerging markets. Damian Williams, the United States Attorney for the Southern District of New York, and other vital regulators have filed charges against Kucoin, Gan, and Tang, alleging they conspired to operate an unlicensed money-transmitting business and violate the Bank Secrecy Act.
This is the DoJ's latest legal action against a trading platform, following the $4.3 billion settlement reached with Binance in the fourth quarter of 2023. Notably, KuCoin was the first high-profile entity charged by the DOJ this year. The Department of Justice emphasized that Kucoin facilitated billions of dollars in daily trades and trillions annually.
However, regulators noted that the exchange facilitated illicit transactions, contributing to money laundering. According to the charges, KuCoin is accused of helping to facilitate up to $4 billion in suspicious and criminal funds.
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