KuCoin Hemorrhages $780 Million After US Charges It With Violating Anti-Money Laundering Laws

Updated: 27 March 2024

Disclosure

Don’t invest unless prepared to lose all the money you invest. This is a high-risk investment, you shouldn’t expect to be protected if something goes wrong.

Join Our Telegram channel to stay up to date on breaking news coverage

KuCoin suffered $780 million in net outflows, the most for an exchange since the FTX collapse, after the US Department of Justice (DOJ) charged it and two founders with violating anti-money laundering laws.

“In failing to implement even basic anti-money laundering policies, the defendants allowed KuCoin to operate in the shadows of the financial markets and be used as a haven for illicit money laundering,” US attorney Damian Williams said in a Mar. 26 statement.

The failure to implement anti-money laundering controls had led to $9 billion in suspicious or criminal funds being received or sent by the exchange, the world’s seventh-largest, the DoJ said. The exchange was also accused of operating illegally in the US and of concealing some records of American customers.

KuCoin Responds To The DoJ Allegations

KuCoin CEO Johnny Lyu responded to the allegations in a Mar. 27 X post, attributing the charges to “typical growth and regulatory issues” that nascent industries frequently face.

“Early-stage development often sees regulatory gaps,” he said.

The challenge we're facing is not unique to KuCoin but rather typical growth and regulatory issues encountered by emerging industries. Early-stage development often sees regulatory gaps, but as the industry matures, we move towards and embrace compliance and standardization.

— Johnny_KuCoin (@lyu_johnny) March 27, 2024

Kucoin also said it is working with its lawyers to investigate the issues brought forward by the DoJ.

CryptoQuant Says KuCoin Is ”Fine”

Despite the massive withdrawals from the exchange, KuCoin has been declared “fine” by CryptoQuant founder and CEO Ki Young Ju.

Surging withdrawals of Bitcoin (BTC) and Ethereum (ETH) were driven by retail investors and had only ”a small impact on the overall reserve,” he said in a Mar. 27 X post.

The exchange has sufficient reserves to process user withdrawals, he added.

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. pic.twitter.com/p4bJJpwnFJ

— Ki Young Ju (@ki_young_ju) March 27, 2024

The CryptoQuant CEO then went on to compare KuCoin’s reserves to those of FTX, and said that KuCoin does not seem to have mixed its own reserves with customer funds.

The comingling of funds was a primary reason for the downfall of FTX. KuCoin’s reserves currently stand at over $4.8 billion, according to on-chain data from Scopescan.