DOJ Charges Lead to 25% Drop in KuCoin Bitcoin Assets

KuCoin has experienced a decline in its Bitcoin (BTC) reserves, which have decreased by over 25% in the wake of legal challenges presented by the U.S. Department of Justice (DoJ). 

Meanwhile, this development is part of a broader trend affecting various assets managed by the exchange, including Ethereum (ETH), USDT, and USDC, all of which have seen drops in their reserves.

KuCoin released the latest (March 31) asset reserve certificate. The user’s BTC assets were 12,114, a decrease of 25.4% from the last time (February 29); the user’s ETH assets were 112,000, a decrease of 21.91%; users USDT assets are 963 million, a decrease of 21.5%.… pic.twitter.com/Bpk5Z9djCj

— Wu Blockchain (@WuBlockchain) April 3, 2024

Reserve Reduction Across Key Cryptocurrencies

The asset reserve report of KuCoin for March showed a dramatic decrease in its holdings, with the Bitcoin reserves dropping from 16,240 BTC in February to 12,114 BTC, which represents a decrease of 25.4%. In the same way, the reserve of Ethereum also shrank and dropped by 21.91% from 114,405 ETH to 112,763 ETH. For the stablecoin reserves like USDT and USDC, there was no exception, as USDT reserves went down by 21.5% to 963 million while USDC reserves decreased dramatically by 33.62% to 39.34 million. 

Moreover, this announcement also led to a decrease in the trading volume and market share of the exchange. The daily trading volume plummeted from approximately $2 billion to $520 million.

At the same time, the market share of KuCoin dropped more than 50%, decreasing from 6.5% to less than 3%. Even though the sentiment was fought with a $10 million giveaway, the exchange’s market position fell.

User Response and Asset Movement

In response to the developing legal cases, according to Kaiko data, KuCoin users have chosen to move their funds to other centralized exchanges that are considered safe, including Coinbase, Binance, OKX, MEXC, and Gate.io. Some of the outflows have also been said to be market makers that are backing out of the exchange.

The outflows from wallets linked to KuCoin reached more than $600 million on the 26th of March, the majority being in USDT and Ethereum. This shift is an indication of users’ move to safeguard their belongings by moving them to off-chain personal wallets or other exchanges.

Legal Challenges and Accusations

After the accusations, KuCoin experienced a recent fall in price. These accusations by the DoJ include the charges filed against KuCoin and its co-founders for supposedly violating anti-money laundering laws related to Ethereum margin trading activities. The allegations state that KuCoin and its co-founders operated an unlicensed money transmitting operation and conspired to breach the Bank Secrecy Act. These legal issues represent a major problem for KuCoin, which had gone through a growth trajectory earlier in the year. Still, now, a tsunami of traders is leaving, and user confidence is diminishing.

However, the DoJ’s convene of KuCoin fits into a broader regulatory crackdown facing the crypto industry, making KuCoin the first major entity that the department is charging this year. According to the charges, the DoJ has singled out KuCoin as the platform where massive trading volumes are carried out, reportedly around $4 billion worth of transactions by suspicious and criminal activities.