UST How I lost $1M because of Kucoin’s manipulation

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Disclaimer: sorry for my poor language, English is not my mother tongue.

Update #1: Initial post

At the beginning of May 2022, investors in Anchor protocol panicked and withdrew their funds ($15B) during a bank run. UST (Terra stable coin) unpegged. The Terra ecosystem collapsed. 50 billion has been lost (1). Some investors are devastated, some are ruined, some of them even committed suicide.

Meanwhile, Kucoin exchange platform has manipulated the UST market to earn more than 33 million dollars and have impoverished their own clients.

I will detail in this post how Kucoin took advantage of the Terra crisis to manipulate the market in its own benefit–how hundreds of Kucoin clients have lost funds and how I personally lost 540,184$ because of their market manipulation.

I will detail, as well, how Kucoin lied and hid what they were doing and how they banned dozens of customers on their Telegram customer service as soon as some of them published proof of Kucoin’s market manipulation.

For information, Kucoin is one of the biggest crypto exchange platform. Kucoin raised $150M from Jump Crypto with Circle Ventures, IDG Capital and Matric Partners and has been founded by Michael Gan, Eric Don, Top Lan, Kent Li, John Lee, Jack Zhu, and Linda Lin.

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Initial situation: I stacked all of my savings resulted from my professional activity on Anchor, and UST started to unpeg

December 2021, I decided to invest all of my assets in Anchor Protocol (that was obviously a big mistake). Almost 2 million us dollars I have made in 10 years of hard work with my web marketing company. I thought Anchor was solid, and UST would never unpeg for more than few hours. All of my assets were held through Anchor. I planned to buy an apartment in Paris at the end of this year but this dream will never come true.

On 8th May 2022, Anchor protocol investors started to considerably withdraw their funds. I withdrew 1,949,390UST and deposited them on my two Kucoin accounts. I made an order to exchange all my UST for USDT at $1 (that was probably my biggest mistake. That price would never have been reached).

On 9th may, for the first time, UST unpegged dramatically down to $0,76.

On 10th may, Terra decided to burn $1,5M in BTC to support UST. UST touched $0,93 before going back to $0,73.

On 11th may, 11h00(UTC) UST went down drastically to $0,30.

At this moment, after reading the white paper and everything about Terra’s situation, I made my opinion : Terra was about to collapse. The panic was too high. UST would never reach $1 again. I made calculations. By selling all my UST at $0,84, I would “only” lose my previous profits thanks to the protocol. I thought it was the price to pay to be sure not to lose 10 years of personal savings. I placed 15 orders to sell around $0,84 on my Kucoin main account waiting to see how the market would react.

https://preview.redd.it/6l34rie881391.png?width=1105&format=png&auto=webp&s=f5770e238a38941ea075f4a0e98ea83175c968ad

https://preview.redd.it/hy0g8aa981391.png?width=1100&format=png&auto=webp&s=96799146c180a4e45989487902c96219bd8bf7a3

https://preview.redd.it/ktmeqi1a81391.png?width=1105&format=png&auto=webp&s=03370b6311c879afb49482d7ccffc963c46ae252

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Kucoin decided to lock UST withdrawals to manipulate the market

On 11th may, 11h19, Kucoin decided to close UST withdrawals (2). They were arguing some fake congestion problems on the blockchain.

https://preview.redd.it/ktivxyuh81391.jpg?width=603&format=pjpg&auto=webp&s=6ec0b2718d4bcd7457ef0bedf0cbdf13dbe86344

Inevitably, the UST price deviated from the global market price. The UST was at that time trading 30% below the price of all other platforms (Kraken, Binance, Huobi, Coinbase, FTX, Gate.io…).

On 11th may, 20h00, UST reached my target price of $0,84 across all competitors, including Kraken. By comparison, the price was $0,59 on Kucoin. At that moment, I had the strong will to sell all of my UST for $0,84 and end this nightmare. With 1,949,390UST I was supposed to save 1,637,487USDT. (If I took the decision to deposit my UST on Kraken instead of K#####!)

https://preview.redd.it/m066h4yi81391.png?width=1048&format=png&auto=webp&s=9e3d2b7d94548a636cf119877368e8eb70d1b327

I contacted Kucoin customer service on Telegram and I realized that hundreds people were complaining for the same exact reason. Many of them, publishing proof that Kucoin was making arbitration, were kicked and banned from the chat (I will detail everything about it later in this post).

On 11th may, 21h58, I sent a message to Kucoin support :

https://preview.redd.it/ovzwd3wm81391.png?width=757&format=png&auto=webp&s=d67b4c84aca838860dd3b8b844df5564dae22703

On 11th may, 22:24, Kucoin finally unlocked UST withdrawals. But it was too late. UST had already fallen sharply to $0,65 (and would very soon fall to $0,20).

On 11th may, from 22:27 to 22:39, I withdrew all my UST to Kraken.

On 11th may, from 22:40 to 02:05 (D+1), I exchanged my 1,949,390UST for 1,097,303USDT for an average price of $0,56.

I lost (1637487-1097303)= $540,184 because of Kucoin’s manipulation.

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Kucoin made arbitrations for 11 hours

There is no doubt that Kucoin had willingly locked the UST withdrawal to make arbitration on the market and cash in the 30% difference between the UST’s value on the Kucoin platform versus their fair market value. And they did exactly the same with LUNA (LUNC now).

https://preview.redd.it/nbuyhugo81391.png?width=594&format=png&auto=webp&s=b04f135c42f12678cb7b8bd1a327a090cd3d15a9

By locking UST withdrawals, Kucoin created for itself an incredibly profitable situation. Kucoin bought UST 30% below the price on their own platform. And then sold them to the real price, 30% higher, on any other platforms.

After this, they just needed to loop and repeat the exact same operation. This, during 11 hours.

Let’s prove it as everything is public on the blockchain :

On 8th may, my main Terra wallet made the deposit of 1,715,000UST on Kucoin Terra wallet : terra14l46jrdgdhaw4cejukx50ndp0hss95ekt2kfmw (3)

This same wallet, terra14l46jrdgdhaw4cejukx50ndp0hss95ekt2kfmw, owned by Kucoin, made 13 withdrawals DURING the supposed “congestion” for a substantial total of 112,436,410UST (4)

Cashing in the 30% difference with other platforms.

So Kucoin made approximately $33,730,923 of profit by manipulating the market and making arbitration.

All arbitration operations are tracked and available on the blockchain (detailed calculations are available in the sources at the bottom of this post) : https://finder.terra.money/mainnet/address/terra14l46jrdgdhaw4cejukx50ndp0hss95ekt2kfmw

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Kucoin lied and hid what they were doing

They consistently kicked and banned every customer that brought evidence of their arbitration operations on the customer service on Telegram.

https://preview.redd.it/srdzdgwp81391.png?width=595&format=png&auto=webp&s=bacb0594c642406b8a2376c9d1532adcfc8853f9

Customer service never stopped to argue that the platform was under maintenance. This could have been true if they didn’t, themselves, make 13 withdrawals during this time.

It seems that this is part of Kucoin’s business plan as they wrote in their terms of conditions: “Kucoin may agree (but is not obligated to) your request to transfer funds” (5).

https://preview.redd.it/gbe9aj0u81391.png?width=940&format=png&auto=webp&s=6953aabd3b577be56fa4ef514f378bf7f4603165

Moreover Kucoin seems to have a habit of breaching financial rules and violate customers’ rights. They are already sued by Ontario regulation in Canada (6)

Kucoin doesn’t even state where the company is domiciled and regulated in their terms of agreement (7)

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Conclusion

Kucoin manipulated the market for 11 hours against any financial laws and authorities rules.

Kucoin cheated to make substantial profits while some of their investors were losing their life savings.

They did it. They also did it with Luna (another cryptocurrency from Terra ecosystem). We know they did it, they still are doing it, and they will continue to do it on others cryptocurrencies as well.

I think this is our duty, as crypto holders, to spread the word, to make public those acts, to ban those actions, in order to build a better and fairer crypto ecosystem.

If you were also victim of Kucoin’s manipulations (UST, Luna or whatever), DM me. You have rights. And we gonna fight against Kucoin through our collective action and the appeal in front of the regulatory an criminal authorities.

Sources/links

(1) : https://www.businessinsider.com/terra-ecosystem-luna-ust-stablecoin-collapse-bitcoin-crypto-do-kwon-2022-5

(2) : https://www.kucoin.com/news/en-withdrawal-service-of-mainnet-luna-terra-luna-tokens-temporarily-closed-20220511

(3) : https://finder.terra.money/mainnet/tx/5388DA9C1C11341DCB62AE0D3ABEF77C8B855DF72E11A5A6816CF6F992DB638F

(4) : https://docs.google.com/spreadsheets/d/e/2PACX-1vSQaiMKhE6f12WhSdgI8Q6OJn5rIjm3_vhtDJ-GwdxgP-yqZ2p86MTRscvVfVLm_yDvRSIN6X5gsv5A/pubhtml

(5) : https://www.kucoin.com/news/en-terms-of-use

(6) : https://forkast.news/headlines/ontario-securities-commission-kucoin-canada-regulation/

(7) : https://www.reddit.com/r/kucoin/comments/rj37e5/which_financial_authority_regulates_kucoin/

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