As the FTX tension continues, the cryptocurrency market is struggling to deal with “fear, uncertainty and doubt (FUD)”. Concerns are growing that the liquidity crisis in FTX will spread to other platforms operating in the cryptocurrency space. The focus of these concerns shifted for a while to the popular cryptocurrency exchange KuCoin. Recently, allegations have been made that the KuCoin exchange is also in the process of bankruptcy. So what actually happened? In this article, we will convey the allegations against the stock market and the response from KuCoin…
Claims of KuCoin: Million-dollar outflow, lack of access and more
As it is known, the latest events in FTX shook the market. On Monday morning, Binance CEO Changpeng Zhao pointed to reports that Alameda Research and FTX’s assets were illiquid. This was a catalyst that brought the market into the current panic. As a result, the FTX crisis has caused crypto users to suspect signs of distress on trading platforms. On top of that, KuCoin, one of the major crypto exchanges, recently went under unannounced maintenance. This triggered the panic that was already present in the cryptocurrency space.
Also, some cryptocurrency traders trading on KuCoin speculated about a possible shortage of funds on the crypto exchange. One crypto account, Lookonchain, partially confirmed the suspicion of a shortage of funds, citing data from crypto analytics firm Nansen. In a Twitter post, Lookonchain stated that KuCoin has witnessed over $235 million stablecoin launches in the past seven days. Nansen’s data also pointed out that KuCoin appears to be the exchange with the most withdrawals. He even said that the withdrawal amount is even more than FTX.
So withdrawals and unannounced stock market maintenance created much of the suspicion. So, are these allegations true? Or are there developments in the network that users are not aware of? KuCoin officials responded to our request for comment on the subject and spoke to Kriptokoin.com about the allegations.
KuCoin spoke to Cryptocoin about the allegations: Is there a shortage of funds?
We asked KuCoin several questions about the above allegations and the liquidity shortage that led to the bankruptcy of cryptocurrency exchange FTX. First of all, we talked about the claims that there is a shortage of funds in Kucoin, similar to FTX. Next, we asked about the Nansen data that Lookonchain put forward. First, we talked about the alleged shortage of funds. We asked if KuCoin is really experiencing a shortage of funds.
A KuCoin spokesperson pointed to KuCoin CEO Johnny Lyu’s statements on Twitter. The CEO tweeted, “Stop FUD!” the explanation was pouring. He also underlined that there is no problem in the stock market. The spokesperson of the exchange also stated that they are working on proof-of-reserves, which are “proof of reserve” that will verify the status of the exchange’s reserves. Apart from that, he stated that they have no affiliation with the FTX exchange. The spokesperson used the following statements:
KuCoin has no investments in FTX Token (FTT) and has never invested in FTX. We are currently working on rolling out merkle-tree proof-of-reserves.
What’s behind the stablecoin exit?
KuCoin CEO Johnny Lyu has responded to allegations of excessive stablecoin exit. He said it was a misunderstanding. It stated that the data was misinterpreted and published the transaction details. Sharing screenshots from Tronscan and Etherscan navigators, he pointed out that the transaction in question took place by converting the ERC-20 based USDT to TRC-20. The CEO used the following statements in his statements on the subject:
We’ve worked hard with Nansen to clarify that this is essentially a transaction to convert ERC20 USDT to TRC20 USDT. Nansen acknowledged that they only track ERC20 tokens, so the TRC20 USDT did not appear. This was interpreted as a stablecoin exit from the stock market.
The screenshots shared by the CEO are as follows:
Why did KuCoin go into temporary maintenance without notice?
KuCoin, spokesperson, used the following statements about the access problem that occurred recently:
KuCoin.com was maliciously hacked on November 8, 2022 at 16:35-17:08. Some users may have experienced delays while logging in. The team identified the issue and responded promptly by cleaning up traffic generated by malicious people. All affected services returned to normal shortly thereafter. Our team will continue to monitor the situation.
How does the CEO of the exchange interpret the FTX event?
KuCoin finally pointed to the CEO’s tweet in response to a question asked about the stock market’s reserves and the current status of the FTX exchange:
I want to say I’m sorry to everyone who was hurt in the FTX incident. Hopefully, everything can be resolved quickly and the industry can get back on track. Protecting user funds is the top priority at KuCoin. We will publish the Merkle tree proof-of-reserves (POF) in about a month. We will work closely with authorized inspection bodies to ensure the accuracy of the figures and information we provide to our users and to build confidence in the industry.
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