Centralized Exchanges Battered After FUD Results in Rough Week – Gemini, Binance, KuCoin

The past week has not been an easy one for centralized exchanges.  Deserved or not, such platforms have been experiencing unprecedented scrutiny in the wake of FTX and its recent implosion.  Whether it be doxing clientele, central bank warnings, or questionable reports, the following tidbits highlight just how treacherous the waters currently are for those operating within the sector.

Gemini

This week saw Gemini suffer not only from extended downtime, amounting to over 7 hours during which clients could not access their accounts, it saw news outlet CoinTelegraph report that it obtained documents detailing a platform breach.  The exchange addressed the situation, stating,

“Some Gemini customers have recently been the target of phishing campaigns that we believe are the result of an incident at a third-party vendor. This incident led to the collection of Gemini customer email addresses and partial phone numbers. No Gemini account information or systems were impacted as a result of this third-party incident, and all funds and customer accounts remain secure.”

The breach in question is said to have resulted in various pieces of information belonging to over 5.7M clients being exposed – something known as ‘doxing'.

On a more positive note, Gemini also shared that it was continuing its global expansion, opening up its services to clients based in both Greece, and Bulgaria.

Binance

Perhaps no other exchange felt the heat this week to the extent that Binance has.  Not only was the exchanges proof-of-reserves called in to question, the auditor which generated the report has reportedly cut off ties with the sector.  This, combined with ill-timed commentary by CZ on the merits of self-custody, resulted in a massive amount of the exchanges clients removing their funds from the platform.

While Binance may not be as open and transparent as people would like, it has managed to handle to situation well from an operational perspective.  Furthermore, it would appear as though much of this activity may be a slight knee-jerk reaction by investors overly cautious after the events involving FTX.  This was supported by data analytics firm, CryptoQuant, which also took a look at Binance and its liabilities, finding that the previous proof-of-reserve report being called in to question was indeed accurate.

Once the justifiable fear of yet another insolvency involving a massive exchange has passed, this pseudo stress-test may actually help Binance strengthen its reputation.  For the time being however, no one should be trusted.

KuCoin

While Gemini was suffering operational issues, and Binance suffering from trust issues, Dutch authorities were issuing warnings regarding KuCoin.  De Nederlandsche Bank stated,

“MEK Global Limited (MGL), doing business as ‘KuCoin’, is providing crypto services in the Netherlands without the required legal registration with DNB. This means MGL is not in compliance with the Anti-Money Laundering and Anti-Terrorist Financing Act (Wet ter voorkoming van witwassen en financieren van terrorisme – Wwft) and is illegally offering services for the exchange between virtual and fiduciary currencies and it is illegally offering custodian wallets.”

The communication went on to indicate that while KuCoin may be operating illegally, customers of the platform were not in violation.  Rather, they are just at an increased risk of being involved in ‘money laundering or terrorist financing'.

Looking back to 2021, there is a precedent for this situation in which Binance found itself in the same spot.  The issue was resolved as the exchange paid a heft fine totaling roughly $3.5M.