KuCoin Has Allegedly Given Tokens 'Volume-Boosting' Offers

Hong Kong-based cryptocurrency exchange KuCoin is at the center of a new controversy in the cryptocurrency space, as some believe some ‘volume-boosting’ offers that allegedly came from it are implying it’s engaging in wash trading.

According to an investigation carried out by The Block, KuCoin has reportedly approached some of the projects behind 16 tokens it recently delisted, asking them to pay up to $180,000 in “volume-boosting fees,” or get delisted from its platform, which has over 5 million registered users.

Per the news outlet, when cryptocurrencies fall into the bottom 18% of tokens by trading volume on KuCoin, they’re put on “Special Treatment rules.” Some of the projects behind these – specifically The Block mentions Jibrel, Publica, Unikrn, and Encrpgen – were advised to pump their trading volume to recover.

Jibrel’s COO Talal Tabbaa was quoted as saying:

We received an email saying ‘you have the ability to improve your volume or you’ll be delisted. Then they recommended market-making firms that would help us reach the minimum daily volumes they set for projects. I was honestly shocked at the requests they were making

He added that KuCoin recommended two market-making options. The exchange also allegedly reinforced that the market makers could help Jibrel’s token reach the minimum trading volume to remain listed.

The news outlet claims KuCoin confirmed an email it saw was sent from one of the exchange’s employees. Taking his offer into account, Tabbaa claimed it was “basically to do wash trading. I’m 100% sure. Whenever there’s a [volume] guarantee, you know there’s something wrong.”

Jibrel eventually turned down the offer. David Koepsell, the CEO of Encrypgen, reportedly claims the firm was also encouraged to boost trading volume through an “extensive marketing campaign.”

KuCoin reportedly pitched him an “advanced marketing package,” priced at $90,000. After he refused to pay, the organization’s token ended up being delisted. Koepsell was quoted as saying:

We found that to be pretty disingenuous. They buy a bunch and then sell a bunch at market just to get the volume.

Another project, Publica, reportedly accepted the exchange’s offer, but eventually ended the deal as the fees grew “beyond what was originally agreed.” The CEO of Unikrn, Rahul Sood, claimed KuCoin came up with “fake your volume fees,” Notably, although he refused to pay Unikrn is still listed. Per his words, they’re trying to build a legitimate business, not a “marketplace for our token.”

Wash Trading 

The CEO of Coinroutes, Dave Wiesberger, reportedly told The Block that the cryptocurrency exchange’s alleged market making offers aren’t common with traditional liquidity providers, as “providing volume [is bad].” This,as it makes it “look like there’s more interest than there is” in a specific asset.

He added:

An exchange by its definition is meant to be a neutral party. Taking the other side of trades makes a massive conflict of interest in that model. Any market making subsidiary would need to have information barriers, and [be] audited.

If KuCoin was connecting the firms to legitimate market makers, things would be different, he concluded. Market makers, in traditional finance, are intermediaries that buy or sell a specific asset, while receiving a spread for the risk taken.

Crypto analyst Sylvian Ribes told the news outlet that Chinese exchanges call market making what is, in reality, wash trading. Wash trading sees an entity trade against itself, artificially pumping volume. The practice is illegal in regulated markets.

In reality, wash trading doesn’t boost liquidity. Although it inflates trading volumes, it doesn’t create real demand for the asset. While marketing campaigns could be legitimate, it isn’t clear whether KuCoin’s offer was.

KuCoin’s Response

The Block reportedly contacted KuCoin for comment, and was told it was “pretty sure” it never offered said project marketing or volume-boosting services. Via email, its representatives allegedly suggested the emails the news outlet obtained could’ve come from fraudulent addresses.

Nevertheless, they admitted the allegations would be a problem is correct. An exchange spokesperson was quoted as saying that KuCoin would “definitely take actions to deal with behaviors that violate our company policy,” if the emails came from its staff.

Notably, the allegations come shortly after KuCoin’s KCS token went up over 13%, thanks to the platform’s 2.0 upgrade. Earlier this month, the exchange also added credit card purchases for major cryptocurrencies.

Sub-accounts in Crypto: What They Are and How They Work

 

Julia Gerstein, a crypto trading bots enthusiast and a content writer at TradeSanta. My final goal is to help readers find what they need, understand what they find, and use what they understand appropriately.


Speaking generally, a sub-account is a segregated smaller account that is tied to a larger primary account. Sub-accounts may serve different functions depending on the objectives of their owners. The term can refer to multiple email addresses linked to one user or secondary accounts tied to a primary account with a financial institution or a bank.

For this article, we will be looking at sub-accounts as they exist in the crypto industry, and specifically on trading platforms.

Built-in Sub-Accounts

On trading platforms, the sub-accounts feature allows users to create a set of subsidiary accounts with different trading strategies, funds and end customers. On some platforms, general accounts already come with built-in sub-accounts.

For example, exchange platform Crypto Facilities provides each user with cash and margin accounts when they sign up. While deposits and withdrawals are completed with the cash account, trading an instrument requires users to make an internal transfer from a cash account to their margin account that corresponds to the instrument in question.

Each instrument has its own margin account. This grants users more control over their funds and allows them to manage risks for each instrument separately from their main balance.

Optional Sub-Accounts

Other cryptocurrency exchanges, such as Gemini and Binance, have launched sub-accounts as an optional feature for institutional investors.

As an optional feature, sub-accounts can serve to introduce additional security measures and different access levels between the main account and its subsidiaries. Binance has underlined the differences between a master account and its subsidiaries, providing the former with the exclusive ability to view all data and balances, transfer funds between accounts, and have full managerial control and access to a range of asset audit tools.

Here master accounts have sole control over the movement of assets between sub-accounts, and can grant each of them different access levels and permissions. This ensures that the main account has the power to direct and monitor the actions of all its associated accounts, while each sub-account can perform its function independently from other sub-accounts.

Not Only for Institutional Investors

While institutional investors have been able to create sub-accounts for a while, this feature is still being introduced by more and more major exchanges.

Now even individual investors can create subsidiary accounts to try and assess the performance of distinct trading strategies. For example, HitBTC recently introduced its own sub-accounts feature that is now available per user’s request.

At HitBTC, sub-accounts enable users to create separate subsidiary accounts with which they can utilize various trading styles and strategies with operational autonomy. While each sub-account is separate, all of them are still tied to a master account and contribute to the cumulative volume of all accounts connected to the master.

Because trading volume is measured cumulatively, the use of the subaccounts feature can open up additional benefits for traders such as lower commissions due to progressive fee tiers that reward users for contributing to the liquidity on the trading platform.

Therefore, users can perform a variety of different trading activities unconnected to each other, and all the activities will still weigh in the financial favor of the parties involved. Master accounts also have access to important data such as the performance of each sub-account and total trading fees of all linked accounts combined. While the feature is designed with institutional and corporate clients in mind, on HitBTC any user can create sub-accounts upon request.

The adoption of this feature by more and more trading platforms will be beneficial for both institutional and individual traders. Some users can utilize it to execute different trading strategies or try various algorithms with a clear picture of their effectiveness, others to manage their team and analyze the performance of each account securely and conveniently.

Featured image by Tyler Franta on Unsplash