KuCoin Accused of Wash Trading with ‘Volume Boosting’ Leak

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KuCoin exchange was accused of encouraging artificial volume and threatening behavior Wednesday by a report that suggested they had tried to get coins with low volume on the platform to buy their market making packages or face delisting. The report in The Block focused on KuCoin’s behaviour in late 2018 when it contacted low volume coins about potential delisting if they didn’t increase their volume, and then tried to sell them packages to achieve that that may have amounted to wash trading.

KuCoin’s Offer is Too Bad to Accept

The report featured an email from KuCoin to one CEO “offering” him a marketing package that might help his project “avoid the risk of getting delisted” at a cost of $90,000. One COO, Talal Tabbaa of Jibrel, was informed of a similar risk to his project, with the solution seemingly being KuCoin’s $180,000 package:

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. It was basically to do wash trading. I’m 100% sure. Whenever there’s a [volume] guarantee, you know there’s something wrong.

Wash Your Problems Away

These two high ranking project members were two of at least four approached by KuCoin with similar requests. Faking volume, also known as wash trading, is the practice of a single entity buying and selling a similar amount of assets back and forth to create fake volume on the exchange and make an asset, or the exchange as a whole, appear more popular than it is. This practice is illegal in traditional finance, and indeed, some crypto exchanges have already been hauled over the coals for doing just that, such as Upbit in December last year. Wash trading is fairly easy to spot on an exchange, with the tell tale signs being similarly sized volume candles appearing on a regular, ongoing basis, as evidence in this tweet:

KuCoin Responds

KuCoin’s response to The Block was less than convincing, stating it was “pretty sure” is had never offered market making services, suggesting that the emails may have come from fraudulent email accounts. They also stated they would “definitely take actions to deal with behaviors that violate our company policy”, which of course no one outside the company would ever know about, were it to happen at all. Wash trading is a known problem in cryptocurrency, and is something that a large number of exchanges have resorted to in order to try and stay relevant during lean times. Not many have been as explicit as KuCoin appear to have been however, and this exposé might just serve as a warning about doing it in the first place.