coinculture.com
Cryptocurrency exchange KuCoin is set to conduct an airdrop of Bitcoin (BTC) and its native KuCoin (KCS) token worth $10 million, as revealed in a letter from CEO Johnny Lyu posted on the exchange’s blog on March 27. This announcement comes shortly after the United States Justice Department brought charges against the exchange and two of its founders.
Although Lyu did not directly address the federal charges, he subtly acknowledged them in the opening sentence of his letter:
“I would like to express my gratitude to all KuCoin users, for your support, trust and companionship during the past few days.”
Drawing a parallel to the exchange’s reimbursement of investors affected by the Confido rug pull, Lyu elaborated:
“Recently, on March 26th and 27th, some users experienced longer-than-expected wait times during the withdrawal process. […] To express our profound gratitude for your support and patience KuCoin will launch a special airdrop event totaling 10 million USD in KCS and BTC.”
Lyu stated that the rules for the airdrop would be disclosed in three days. The recent withdrawal delays may have been a result of increased volume as cautious users withdrew from the exchange. Hence, the airdrop serves as a gesture of appreciation towards users who remained loyal during the crisis.
The timing of the airdrop is significant, given that KuCoin faced legal actions just a day prior. The Justice Department indicted the exchange’s founders for violating the Bank Secrecy Act due to the absence of an Anti-Money Laundering program and for operating an unlicensed money-transmitting business. Concurrently, the Commodity Futures Trading Commission (CFTC) initiated a civil case against KuCoin for breaching the Commodity Exchange Act and CFTC regulations.
Despite the charges, KuCoin assured users of the safety of their assets, although KCS experienced a 12% decline in value within 24 hours.
Airdrops carry inherent risks, including potential regulatory implications. The SEC’s “Framework for ‘Investment Contract’ Analysis of Digital Assets” highlighted that the absence of monetary consideration does not negate the investment of money prong of the Howey test, indicating that an airdrop may be deemed a sale or distribution of securities.
In a related development, the DeFi Education Fund collaborated with a small Texas clothing company to file a lawsuit seeking declaratory judgement against the SEC, aiming to prevent the agency from prosecuting the company for conducting an airdrop.