KuCoin’s Market Share Declines by 50% After DOJ and CTFC Charges

Crypto exchange KuCoin has seen its market share of daily trading volume decline by half in recent weeks, according to Kaiko, a blockchain research and analytics firm.

The decrease comes days after the U.S. Department of Justice (DOJ) and Commodity Futures Trading Commission (CFTC) charged the company.

KuCoin Daily Trading Volume Plunges

Following the announcement of the charges, there was a surge in users seeking to withdraw their funds from the platform, leading to a deceleration in the withdrawal process. In response, KuCoin initiated an $8.95 million airdrop program to tackle the situation. Nevertheless, despite these efforts, the exchange’s market share has decreased by more than half, dropping from 6.5% to 3%, as reported by Kaiko data.

Before the charges, KuCoin’s daily trading volume stood at $2 billion. However, the charges brought about a drop in the daily volume by approximately 75% to $520 million. In addition, KuCoin users’ Bitcoin holdings in March dropped by 25.4% to 12,114 BTC, while Ethereum balances declined 22% to about 112,000 ETH. The Tether held by users also went down about 22% to 693 million USDT.

Data from DeFiLlama confirms this trend, with over $843 million worth of digital assets withdrawn from the platform in the past week alone.  On-chain data indicates that KuCoin users have been transferring funds to rival crypto exchanges such as Coinbase, Binance, and OKX, as well as their self-custodial wallets. Some outflows may also be attributed to market makers leaving the exchange.

Despite these declines and outflows, KuCoin’s proof-of-reserves certificate demonstrates that the firm has fully backed assets within its system. According to the report, the collateralization of the tokens ranged from 109% to 115%.

DOJ and CTFC KuCoin Charges

Last week, the U.S. Department of Justice charged KuCoin and two of its founders, Chun Gan and Ke Tang, for violating anti-money laundering laws.

The DOJ said that the exchange facilitated over $9 billion laundering and intentionally circumvented U.S. anti-money laundering (AML) and know-your-customer (KYC) regulations by falsely claiming to have no U.S. customers.

In one instance cited by the DOJ, between August 2022 and November 2023, 197 KuCoin deposit addresses received about $3.2 million worth of cryptocurrency from the virtual currency mixer Tornado Cash. Notably, the U.S. Treasury has sanctioned Tornado Cash.

In addition to the Department of Justice’s allegations, the Commodity Futures Trading Commission (CFTC) filed a parallel civil action against KuCoin. The CFTC accused KuCoin of operating a digital asset derivatives exchange unlawfully. As part of its legal action, the CFTC seeks disgorgement, permanent trading and registration bans, civil monetary penalties, and a permanent injunction against future violations by the exchange.