KuCoin’s reserves in stablecoins have decreased by more than $100 million in three hours after the US Department of Justice [DOJ] announced that it initiated an indictment. According to CryptoQuant, the mass exodus of stablecoins is primarily driven by clients based in the United States who were apprehensive about their accounts being blocked or frozen by the US or their broker. It is worth noting that the reserves consist solely of ERC-20 stablecoins compatible with Ethereum.
The focus of the indictment is KuCoin’s two founders, Chun Gan, a.k.a. “Michael,” and Ke Tang, known as “Eric.” In addition to “conspiring to violate the Bank Secrecy Law,” the DOJ has accused the top execs of multiple charges, such as failing to maintain an adequate anti-money laundering [“AML”] program and operating without a license.
Reports from SpotOnChain further shed light on the withdrawal. After lodging a criminal complaint against KuCoin, roughly $500 million in assets have been withdrawn from KuCoin on Ethereum in the past few hours, including 274 million USDT, 15,500 ETH, 50 million ONDO, 12 million FET, 95.38 million GHX, etc. At present, KuCoin hot wallets still hold over $3.6 billion worth of assets on Ethereum.
Data from 0xscope showed that KuCoin’s overall assets have posted a net outflow of approximately U$1.195 billion in the past 24 hours, and it still holds $4.02 billion in assets [including its exchange tokens].
KuCoin Responds to DOJ Charges
The platform has been grappling with legal and operational woes since the Luna Blowup, which crippled many major industry players, exposing their liquidity crises. Subsequently, the firm was banned by the Canadian Regulator, the Ontario Securities Commission [OSC], and faced a lawsuit from the Attorney General of New York State, accusing the trading platform of violating the Martin Act in three different ways.
KuCoin was launched into a criminal investigation by the U.S. in 2023 and has also been subject to multiple investigations in China. All these factors prompted the Seychelles-based crypto exchange to consider ceasing operations and selling the exchange last year.
As of the latest development, KuCoin’s CEO remained defiant, emphasizing that the challenges it faces are not unique but rather typical growth and regulatory issues encountered by emerging industries.