DOJ vs KuCoin: $5B Suspicious tx and $800M Outflow

Q1 Mining Data | Orderly Network Points

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Good Morning.

It’s not every day that you wake up to the news that North Korean developers have hacked and returned $60M+ in crypto. What’s even more remarkable? Everything happened in under eight hours. Pacman and ZachXBT are chads.

In Today's Email:

  • What Matters: KuCoin lawsuit ⚖️ 

  • Case Study: Q1’24 Mining Data  ⛏️ 

  • Governance & Features: Orderly points 💯

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State of play: The Department of Justice charges KuCoin and its two founders with anti-money laundering law violations, while the CFTC also filed a related civil action against KuCoin.

  • The DOJ indicted KuCoin and founders Chun Gan and Ke Tang for running an unlicensed money-transmitting service and breaching the Bank Secrecy Act.

  • According to the DOJ, these oversights led to over $5B received and over $4B sent in "suspicious and criminal funds."

  • The indictment accuses KuCoin of evading US AML and KYC regulations by falsely claiming it had no US customers, despite having a significant US user base.

  • Until July 2023, KuCoin didn't mandate customer identification. Post-notification of its activities, KuCoin implemented KYC for new, but not existing, customers, according to the DOJ.

  • KuCoin faces its second legal issue, with NY Attorney General Letitia James suing them in March 2023 for violating state securities and commodities trading laws.

The CFTC said in its complaint that KuCoin illegally operated a crypto exchange and that 20% to 50% of its customers were based in the US.

  • Despite claims of implementing KYC procedures in November 2018 by KuCoin, the CFTC claims it still allowed US customers to trade without restrictions and even encouraged avoidance of KYC.

  • KuCoin also targeted US investors through influencer campaigns and industry events like Consensus 2022.

  • The CFTC seeks disgorgement, penalties, trading and registration bans, and an injunction against future violations.

However, KuCoin stated that its operations and user assets remain secure despite ongoing legal reviews and claims that it commits to international compliance. The CEO of KuCoin, Johnny Lyu, affirmed normal platform function and the safety of assets, promising updates.

Why it matters: This marks another milestone from the US DOJ against offshore exchanges with weak compliance.

  • After a successful case against Binance, the DOJ will only continue to go after more offshore CEXs. We won’t name names, but there are definitely way more than KuCoin that will be on the list.

For builders and investors: It’s a sign that the era of wild west crypto offshore centralized exchanges has come to an end. The real frontier is onchain and it will remain so for the foreseeable future.


State of the Network’s Q1 2024 Mining Data

Credits to Coin Metrics and Parker Merritt for the original report

State of play: The launch of spot Bitcoin ETFs increased mining revenues. Similar to last year, on-chain activity, boosted by Ordinals, continues to raise transaction fees and provide new revenue opportunities for miners.

However, the upcoming Bitcoin Halving will halve miners' BTC earnings. Miners will soon face greater scrutiny, with on-chain metrics crucial for stakeholders and strategists.

Here are the key takeaways from the “State of the Network’s Q1 2024 Mining Data Special” by Parker Merritt:

Current State

  • As the BTC price climbed and transaction fees remained high, miner revenue soared to a record-breaking $76M in a single day in March.

  • The top 3 publicly traded mining companies, Marathon Digital, CleanSpark, and Riot Platforms, vie for investor interest, each with a unique strategic emphasis.

  • Marathon Digital has launched its "Slipstream" service, facilitating exceptionally large transactions and mining the three largest Bitcoin blocks on record, each exceeding 3.98 MB.

  • Bitcoin's estimated power consumption reached a new peak of 19.6 GW in February.

  • However, The efficiency of the average ASIC miner has improved, now consuming just 30.99 J/TH.

Halving and Expansion

  • The upcoming Halving, slashing rewards to 3.125 BTC, tests miners' resilience, though institutional funds could offer support.

  • Expected industry consolidation and political challenges persist, with a shift towards decentralizing operations internationally.

  • Looking to 2024, miners will navigate between capital availability and the advantageous conditions of emerging markets for expansion.

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a16z’s CSX Spring 2024 Cohort

a16z’s Crypto Startup Accelerator (CSX) Spring 2024 program kicks off this week. 25 early-stage crypto startups gathered in London to speed up their path to product-market fit and set them up for long-term growth and success.

Here are the CSX Spring 2024 participants:

  • AminoChain: a decentralized bio-sample marketplace

  • Collar Networks: building the investment bank of the future

  • Compass Labs: building a new standard interface for DeFi

  • Hungry Cats Studio: verification of safe and trustworthy AI workflows

  • Launcher: a crypto product hunt and platform for building smart contract mini apps

  • MagicBlock: framework for on-chain gaming on Solana and SVM

  • NEBRA Labs: an R&D organization that scales and composes proof verification on blockchains 

  • Neynar: developer infrastructure for Farcaster

  • NodeKit: building a shared sequencer to help decentralize rollups and improve interoperability

  • Nosh: a decentralized food delivery protocol

  • OpenLayer: scaling web3 through optimistic verifiable computation

  • OpenTrade: provides institutional lending and yield products for the new digital economy

  • Playmint: creating an autonomous world that lets builders create onchain game experiences

  • Roux: a culinary platform for the digital era

  • Sablier: provides infrastructure for token distribution in web3

  • Scrypted: building at the intersection of AI, gaming, and decentralization

  • Spire: a zk Appchain network with atomic composability

  • Strobe: a DeFi scaling network that enables new permissionless and transparent markets

  • taralli labs: a protocol that enables an efficient and decentralized zero-knowledge proof supply chain 

  • Tata Bazaar: a social commerce platform connecting the physical and digital worlds of fashion and beauty

  • TITLES: builds creative tools powered by artist-trained AI models

  • Tranched: automates private securitization transactions using blockchain technology

  • Tweed: wallet and payment solution to onboard consumers in blockchain-based applications

  • Valyu Network: provides trusted data to AI models and applications

  • zkPassport: authentication for government-issued passports with selective reveal of information


The Road to The Order

Orderly Network is launching a gamified campaign, "The Road to The Order," where traders earn "Merits" to compete for Orderly Network tokens.

  • A substantial part of the Orderly token airdrop will be distributed based on the campaign rankings.

  • The campaign starts next week with a special section on the Orderly Network site featuring a leaderboard and merit.

  • The campaign is expected to have over 10 weekly epochs.

  • Orderly will also reward various contributors, including early community members involved in Galxe and Zealy initiatives and those trading on EVM and NEAR before the leaderboard launch.

  • This campaign is not available to users in the US.

Other notable feature updates:


  • SEC seeks $2B from Ripple.

  • AltLayer enables token staking.

  • Solana welcomes Circle’s CCTP.

  • Binance blocked by Philippines’s SEC.

  • Nigeria charges Binance with tax evasion.

  • Franklin Templeton debuts new crypto SMA.

  • Coinbase to store more USDC balances on Base.

  • HSBC launches retail tokenized gold products in HK.

  • CFTC calls ETH a commodity in the KuCoin complaint.

  • MicroStrategy stock breaks past $1,860 to reach ATH.

  • Munchables exploited for $62M, hackers returned the fund.

  • Vitalik takes a dig at the Metaverse and calls it a branding ploy.

  • LSE will roll out a market for Bitcoin and Ether ETNS on May 28.

  • NEAR launches multichain transactions from one account feature.

  • EU markets watchdog steps closer to finalizing rules under MiCA.

  • KuCoin sees nearly $800M in net outflow following DOJ indictment.


  • Our Network’s read on derivatives.

  • IOSG Ventures’ read on an incomplete guide to AVS.

  • Li Jin’s read on meme coins as the new GTM strategy.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.