Recent legal confrontations with US authorities have led to a notable decrease in user assets on KuCoin, as indicated by the exchange's latest proof-of-reserve certificate.

According to the update, KuCoin users' Bitcoin holdings saw a 25.4% decline to 12,114 BTC in March, while Ethereum balances dropped by around 22% to approximately 112,000 ETH. Similarly, the quantity of Tether's USDT held by users on the exchange decreased by about 22% to 963 million USDT tokens.

Data from DeFiLlama further supports this downward trend, with over $843 million worth of digital assets withdrawn from the platform during the past week. This led to KuCoin's balance reducing to $3.2 billion from the over $4.3 billion recorded as of March 26.

Despite these declines and outflows, KuCoin's proof-of-reserves certificate indicates that the firm has fully backed assets within its system. According to the report, the collateralization of the tokens ranged from 109-115%.

KuCoin's recent challenges stem from consecutive lawsuits filed by US authorities, including the US Department of Justice and the Commodity and Futures Trading Commission (CFTC), last week. These authorities alleged that the platform violated anti-money laundering regulations with its unregistered operations within the country.

Simultaneously, KuCoin's market share and trading volume have significantly declined during the past week.

According to Kaiko data, the exchange's daily trading volume dropped to around $520 million from approximately $2 billion, with the exchange's market share falling from about 6.5% to less than 3%.

Kaiko reported that exchange users transferred their assets to rival centralized exchanges like Coinbase, Binance, and OKX. Some outflows can also be attributed to market makers leaving the exchange, while others are sending their funds directly to their on-chain wallets.

KuCoin has addressed its legal battles with CEO Johnny Lyu emphasizing the exchange's compliance efforts. He stated that the exchange's legal challenges are not unique and that the platform continues to operate optimally.

Furthermore, the exchange unveiled plans for a special $8.9 million airdrop of its KCS native token and Bitcoin to its users. Lyu explained that this airdrop aims to compensate users who experienced withdrawal delays between March 26 and 28, with additional rewards planned for loyal users who did not withdraw assets.