Rumor Mill: KuCoin to Become Insolvent, Freeze Withdrawals

Rumors began circulating on Friday that Seychelles-based cryptocurrency exchange KuCoin would be the next to declare insolvency and seize its users’ funds.

The rumors began with a user named “BuckleUpBrandon,” who wrote in an early afternoon tweet, “I am hearing rumors that KuCoin is about to halt withdrawals in the near future.” Another user, “DeFifrog,” also wrote in a since-deleted tweet, “Just got credible info KuCoin is insolvent.”

The announcements prompted a cascade of similar messages from other users, including Miles Deutscher. “Hearing some rumours that KuCoin could be halting withdrawals in the near future,” Deutscher wrote in an afternoon missive. “Apparently they ‘suffered immensely’ from the $LUNA collapse. If you have funds on KuCoin, consider withdrawing them. After all, it’s better to be safe than sorry given recent events.”

Breaking News: @DeFifrog1 claims to have credible information that KuCoin is insolvent! pic.twitter.com/9hvnDe4oTW

— Smol News (@NewsInSmol) July 1, 2022

Good luck everyone! Tried to withdraw my coins from Kucoin 1.5 days ago and now suddenly, without prior warning, they are requiring kyc to do so. I’ve used the exchange for 4 years and never had this happen. #KuCoin pic.twitter.com/XKO0yUQ8Vz

— Sackofspuds (@Strictflow) July 1, 2022

Anecdotal reports enflamed the suspicions. “Good luck everyone!” one user wrote. “Tried to withdraw my coins from Kucoin 1.5 days ago and now suddenly, without prior warning, they are requiring kyc [ID verification] to do so. I’ve used the exchange for 4 years and never had this happen.”

Some observers with credible track records — including the pseudonymous FatManTerra — questioned the allegations. “The KuCoin rumours are exactly that – rumours,” FatManTerra wrote. “They’re all stemming from one source of dubious credibility – I’ve asked around and there is no real evidence for any of it. In general, probably worth de-risking from *all* exchanges, but nothing KuCoin-specific yet [in my opinion].”

The KuCoin rumours are exactly that – rumours. They’re all stemming from one source of dubious credibility – I’ve asked around and there is no real evidence for any of it. In general, probably worth de-risking from *all* exchanges, but nothing KuCoin-specific yet IMO.

— FatMan (@FatManTerra) July 1, 2022

FatManTerra’s skepticism didn’t stop the frenzy from growing into Friday evening, when “Otteroooo” issued an ominous warning. “WITHDRAW FROM KUCOIN RIGHT NOW,” Otteroooo wrote. “Not a drill no time for thread. Like and retweet to spread the message. Otter hardly wrong in such matters”

WITHDRAW FROM KUCOIN RIGHT NOW

Not a drill

no time for thread

like and retweet to spread the message

otter hardly wrong in such matters

🦦🦦🚨🚨

— otteroooo (@otteroooo) July 2, 2022

User fears were stoked earlier in the day by Voyager Digital’s announcement that it was freezing its customers’ funds in an effort to combat its own financial difficulties, making it the fourth exchange to do so in less than a month. Celsius Network began the trend on June 13, when it announced that a freeze was “necessary” for “our entire community,” followed by Babel Finance and CoinFLEX.

KuCoin, which has more than 18 million users in 200 countries or regions, was founded in 2017 by CEO Johnny Lyu. It raised funds most recently in May at a $10 billion valuation, which would easily make it the largest exchange to become insolvent to date.
Lyu was last heard from in public on June 14, when he wrote on Twitter, “KuCoin is sticking to our hiring plans despite the downturn. We believe talent is the most important factor to remain competitive in #crypto, and we are actively looking for professionals in R&D, BD, marketing, etc.”

The company did not immediately respond to a request for comment from GoblinCrypto.

July 2 Update: Lyu denied the rumors late Friday. “Be aware of FUDs!” he wrote on Twitter, using an acronym for fear, uncertainty, and doubt. “Not sure who’s spreading these sheer rumors, and what their intentions are, but #KuCoin does not have any exposure to LUNA, 3AC, Babel, etc. No ‘immense suffer’ from any ‘coin collapse,’ no plan to halt withdrawal, everything on KuCoin is operating well.”

“Being transparent is always one of our key principles,” he added. “For FUDers who intentionally spread unverified info, KuCoin reserves the right to take legal actions.”