Cryptocurrency exchange KuCoin will hold an airdrop of Bitcoin (BTC) and its native KuCoin (KCS) token worth $10 million, according to a letter from CEO Johnny Lyu posted on the exchange’s blog on March 27. The news comes a day after the United States Justice Department announced charges against the exchange and two of its founders.
Lyu did not mention the federal charges, although he alluded to them in the first 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.”
Comparing the airdrop to the exchange’s reimbursement of its investors who lost money in the Confido rug pull, Lyu continued:
“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.”
Rules for the airdrop will be released in three days, Lyu wrote. The recent delays in withdrawals were possibly caused by the high volume as wary customers abandoned the exchange. The airdrop thus rewards users who remained loyal to the exchange in its time of crisis.
Related: KuCoin agrees to ban New York residents and pay $22 million settlement
The timing of the airdrop is noteworthy since KuCoin was hit with a barrage of legal actions one day earlier. The Justice Department unsealed an indictment for violations of the Bank Secrecy Act for lacking an Anti-Money Laundering program by the two founders and operating an unlicensed money-transmitting business.
Simultaneously, the Commodity Futures Trading Commission (CFTC) initiated a civil case against the exchange for violations of the Commodity Exchange Act and CFTC regulations.
KuCoin hastened to assure users that their assets were safe after the charges were filed and KCS fell 12% in 24 hours.
Airdrops come with risks, not the least of which is the possibility of regulatory action. The SEC wrote in its document “Framework for “Investment Contract” Analysis of Digital Assets”:
“The lack of monetary consideration for digital assets, such as those distributed via a so-called ‘air drop,’ does not mean that the investment of money prong [of the Howey test] is not satisfied; therefore, an airdrop may constitute a sale or distribution of securities.”
The DeFi Education Fund teamed up with a small Texas clothing company sued for a declaratory judgment against the SEC to prevent the agency from prosecuting the company for holding an airdrop.
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