KuCoin delisting Solaris XLR after a long history of shady exchange behavior & malpractice
As most of you may be already aware, KuCoin has announced that Solaris XLR will be delisted from their platform on 31st of August, 2019, with trading ceasing on the 31st of May. Source
In this article we would like to go into the reasons for the delisting and also underline gross malpractices that we have experienced since the very beginning when XLR got listed on KuCoin.
How XLR got listed on KuCoin
It is important to start at the very beginning as the KuCoin incompetence also started here. As some of you may recall Solaris was part of the 2nd “Vote For Your Coin” competition which started on December 20th, 2017 (source). With the help of our amazing community, we managed to clinch a victory on the 26th of December, and win a listing on their platform (source).
This was a great achievement for everyone involved with XLR, but this is also were the KuCoin incompetence begins to show. They listed XLR without doing any Due Diligence at all:
- Solaris team never signed an NDA (This is why we are doing this article)
- Solaris team never signed a listing contract (We will come back to this caveat later)
Things didn’t start out all that bad, we enjoyed some positive months of trading on KuCoin at first, but soon we discovered how incompetent their team was at that time.
April 18th, 2018 — The First Technical Incompetence
Solaris was coming up to a major change, moving from Proof-of-Work to a Proof-of-Stake consensus mechanism, which was slated for April 16th. As the Solaris blockchain moved to the new consensus protocol, due to unforeseen technical issues the blockchain stopped producing new blocks, causing the team to instantly work on an emergency wallet release to fix the issue, released on 17th of April. After the release of the new wallet, we contacted KuCoin informing them of the Proof-of-Stake change and sending them the wallet to update on their platform.
This is where the problem starts. KuCoin were clearly not familiar how Proof-of-Stake wallets work and their engineers were not familiar with the implementations of the wallets. After updating the wallet on their platform, they allowed it to stake causing issues with their internal database. This issue caused “imaginary” deposits to arrive to users wallets that previously held XLR. Some users reported that as much as 6k XLR (43k USD at the time of writing) got credited to their accounts out of of the blue. Subsequently, a lot of these people just started dumping their newly created balances straight into the market.
Unfortunately this happened in the middle of the night in Europe, meaning we did not find out that something is up until approximately 4 hours after the incident. We reached out to KuCoin immediately upon seeing that something is wrong and a number of users reporting that they got these XLR deposits credited to their accounts.
KuCoin were of course oblivious that anything has happened at all, fortunately they set up a group chat with our team and their management and technical people. We requested that they should immediately turn off the deposits and withdrawals, and halt all trading to minimize the damages. While they did turn off the wallets approximately half an hour after our request (source). At this stage more than 320k USD of XLR got market sold on the exchange. It took them another 2.5 (source) hours to finally close trading because they had to perform “Technical Analysis first”, during this time another approximate 150k USD worth of XLR got dumped on the markets. Please remember, that NONE of this XLR actually existed in the KuCoin wallets, it was all imaginary.
After closing the markets the communication went dark until next morning when we received this message:
As you can see, KuCoin calculated that over 68k of imaginary XLR got credited to user accounts and then dumped on the market. And what do they expect? That we pay it all back to them. For what reasons? Because we didn’t provide a “tech-manual” for the update, which no one ever told us to provide in the beginning. This also begs to questions why perform an update without the supposed Tech-Manual if this is the process they have in-place?
Regardless, we pushed back and said we won’t pay that amount for their incompetence… they reply was that we cover 70% of the damages with this message:
At the end of the day we agreed to cover 50% (34178.7444 XLR) of the damages caused by their team as frankly we did not see another option at that time without getting delisted from KuCoin. These funds amounted to about 40% of the Developer Fund which was used for various initiatives and development of projects around Solaris at the time.
In retrospect, this was not a good decision as the malpractices only get worse. We also prepared a statement regarding this situation, but KuCoin insisted to review it personally and that we redact any details from the statement that puts them in a negative light.
June 28th, 2018 — Second Technical Incompetence
Roll on just 2 months later, and we wake up to another massive dump of the price and users reporting that XLR got randomly deposited to their accounts. This time there was no Solaris wallet updates or anything at all that KuCoin could blame us for… and this is the conversation we had with them after getting reports from users:
It seems like this time they realised their mistake quicker, closed the markets before too much damage was done and then had zero communication with us regarding what exactly happened as you can see in the screenshot above. No explanation, and no communication or even a word of apology for crashing our price again. At least they did not have a nerve to ask us to cover the damages again.
We estimate that another 5k to 10k of imaginary XLR got dumped on the markets as seen here:
December 2018 — Beginning of the “ST” category abuse
KuCoin has a Special Treatment category where projects are placed before they may get delisted. You can read about their ST category here: Source
KuCoin have made sure to not include the most important reason why they place projects under ST category. They request the projects to keep up a liquidity requirement average of 5 BTC per day, which very much sounds like “wash trade on our exchange, or risk delisting”.
Here is the exact email we received every Monday morning when there was an ST flag on XLR:
Thing is this is not the first time there have been reports about this shady practice from KuCoin, with it originally being reported in this article: ARTICLE
Clearly KuCoin don’t care about their reputation and continue to engage in this farcical activity.
When the ST flag was placed in December, as a team we decided that keeping KuCoin at least until Txbit launches is essential… thus we did comply with their demands are wash traded to meet to volume requirement. Not a proud moment to fall for these tactics, but keeping the listing seemed important at that time. ST flag was removed in mid-January.
February 2019 — Another “ST” flag, but for different reason
Approximately 2 weeks after the first “ST” flag was removed, it appears again on XLR. This time for a different reason.
Now KuCoin are performing regulatory checks and all of a sudden need a legal opinion on XLR from one of their suggested legal firms. What’s the catch? It costs about 10k USD to get a legal opinion from a lawyer. We tried to explain that XLR is not made by a company, and it’s not controlled by a single entity thus we are not at liberty to carry out legal opinions. After multiple days of back and forth with the KuCoin team, we eventually brought up the fact that XLR never signed any contracts, agreements or even NDA’s when it got listed. We also threatened legal action and that we would go public for the gross incompetence of their service and processes, especially tied to the two incidents described above which hurt our reputation.
After receiving our legal action threats, KuCoin dropped the “ST” flag and one week later sent us another email requesting to sign a contract with KuCoin.
The catch? The Contract is backdated all the way to December 26th 2017, the day we got listed.
Frankly this is an illegal action and we politely declined to comply with their shady request. Signing this contract would also mean that we are responsible for all actions described above and agree to not disclose any information or dealings like we are doing right now. Oops, sorry KuCoin for not keeping our mouths shut!
April 2019 — Final “ST” flag and delisting
Once again KuCoin put Solaris into the “ST” category and begin their weekly Monday email process to let us know of our average volume, and that 5 BTC / Day is required. We don’t have the resources to wash trade just so we could pay their salaries, and eventually XLR got delisted, which brings is to the current moment. Frankly, deep down we are kind of happy after everything we had to endure from KuCoin. Most projects would probably give up after experiencing the set-backs, but we powered through and even finished Txbit like we set out to do from the start.
What’s next for Solaris?
It’s kind of ironic that we set out to build Txbit in January 2018 with a mission to change the shady practices and lack of transparency with current exchanges, and all of this before all the negative things happened with KuCoin. Regardless, this experience only strengthened our goals and mission to offer a fair and transparent exchange, just like we have with Txbit.io!
After all the shadiness and awful practices carried out by KuCoin, we see this as a good opportunity to start on a clean slate with Solaris also. As most of the community already knows, we proposed to move to a C# codebase, forked from Stratis. We have already made some significant progress on the new network and wallet and look forward to sharing more with you in the coming weeks. We will also explore new exchange listings when the new network is launched, but at least now we have tenfold the experience dealing with exchanges and now exactly what to look for.
Thank you for all the support to our community all the Solaris and Txbit users!
Join The Solaris Community:
Website — https://solariscoin.com
Twitter — https://twitter.com/SolarisCoin
Telegram — https://t.me/solariscoin
Discord — https://discord.gg/wMcqapP
Reddit — https://www.reddit.com/r/solarisxlr/
Facebook — facebook.com/solariscoin/
Offical ANN — https://bitcointalk.org/index.php?topic=1831629.0