KuCoin’s IEO Was a Massive Failure: Bots & Exchange Mismanagement

 

Published first on: https://bitcoinexchangeguide.com/kucoins-ieo-was-a-massive-failure-bots-exchange-mismanagement/ (Authored by Zerononcense)

Earlier this week (April 3rd, 2019), KuCoin launched its first official IEO on their platform for a cryptocurrency project called ‘MultiVac’ ($MTV).

KuCoin announced this from their official communications on their website on March 26th, 2019.

Token Sale of MultiVAC of KuCoin Spotlight will start on April 3rd

KuCoin is the most advanced and secure cryptocurrency exchange to buy and sell Bitcoin, Ethereum, Litecoin, TRON, USDT, NEO, XRP, KCS, and more. KuCoin also provide Excellent Support, Maker & Taker Transaction Fees, Open API

 

The announcement included fundamental information about MultiVac’s metrics as well as other tangential information about the project.

KuCoin’s exchange currency ($KCS; KuCoinShares) were needed to participate in this IEO.

Major Problems With the Launch

The first and biggest problem with the launch was the fact that the IEO essentially sold out in less than 5 seconds despite the fact that customers were required to both fill in their password/pin details, complete a captcha and choose their desired order amount before completing a purchase.

Obviously, the idea that any human being would be able to complete all of these tasks in the given time is highly implausible. So many users came to the conclusion that there were was a massive influx of bots on the platform that had essentially front run the entire IEO.

Below are some responses from users that had unsuccessfully attempted to purchase some of the ‘MTV’ token from KuCoin at the time of the IEO launch:

Adam Kracík on Twitter

@KuCoinUpdates 2 seconds seems like everything must been done by bots, cause only pin should take about two seconds to type in – i would like to advise kucoin to change the rules – this is crazy – there will never be space for regular investor who does not own bots.

Fonzie on Twitter

@gan_chun Man, this was disappointing. I had my order submitted within the first few seconds and got the ‘out of products’ error. I thought KuCoin had an anti bot mechanism?

OSCAR OSAZEE EDOMWANDAGBON on Twitter

Bots trading on kucoin’s very first IEO what a shame. https://t.co/rR4cxYxSoG

Crypto_Suwail on Twitter

Kucoin’s first IEO was a total disappointment. Its all Bot’s play and people got entry before timer start. Then KCS dumped hard. @gan_chun should do something better and fair on their next IEO. Launchpad is still the king! @kucoincom @binance

 

Response From the KuCoin CEO

After mounting scrutiny, videos, and attention from the bulk of the KuCoin userbase as well as the widespread crypto community, the KuCoin CEO (Michael Gan) reassured users that the platform would look into the possible usage of bots and explore potential solutions if evidence of such were found:

Michael Gan on Twitter

(1/2)We are reviewing all the purchase transactions for MTV sale, and about 100 users finished the purchase within 3 seconds. We will further investigate those 100 transactions and if bots/scripts were used during the purchase, we will take serious actions on those transactions.

Michael Gan on Twitter

(2/2)Also, as I stated earlier, lottery draw will be introduced for the next Spotlight project.

 

Per the tweets above by Michael Gan, there were approximately 100 users on the platform that completed a purchase on the platform within 3 seconds. It is unknown whether this number represents the total number of users that were detected by KuCoin or simply the number of users that they had detected at the time that Michael Gan had posted the tweet.

In either case, the above tweets appear to be irrefutable evidence from the KuCoin CEO that there was clearly some level of ‘bot’ behavior in the purchasing of the $MTV cryptocurrency.

As stated above in this report and by many other users, the necessary process that had to be completed in order to participate in the IEO would have required that a normal human being spend at least 6–10 seconds to complete.

The CEO of KuCoin also confirmed that

Response by MultiVac

The next day (April 4th, 2018) MultiVac tweeted a response to the situation, stating:

MultiVAC on Twitter

🥰🥰 After talking with the KuCoin team, MultiVAC decided to open the second round token sale and do airdrop on the KuCoin Spotlight platform for solve the problem that bots cheating and the failure of many fans to participate in MTV token sale yesterday. Enjoy it!!! https://t.co/VyhP36K4VP

 

Many users were quick to comment on the announcement by stating that it was not a sufficient remedy to the issue of bots.

Yet Another Problem with the KuCoin Sale

On top of the major issue with bot usage on the platform, there was yet another error on the part of KuCoin exchange, which Michael Gan alluded to in his next set of tweets following the ones addressing bots on the KuCoin exchange.

Specifically, Michael Gan stated:

Michael Gan on Twitter

(1/2) The deduction of KCS from trading account was not instant, it was done few minutes after the success notice of the purchase. Some users sold their KCS before the deduction of the KCS, so the payment failed.

Michael Gan on Twitter

(2/2)And the MTV share of those unlucky users were returned to the pool. That’s why some lucky users landed some MTV after 10 minutes.

 

These tweets were in response to users that happened to be quick enough to receive $MTV from the platform that were later surprised to find that their $MTV purchase had not gone through.

According to Michael, this was due to the fact that users had made the incorrect assumption that they still had $KCS (KuCoin’s exchange token) still in their possession and had placed a successful sell order for it. Therefore, when the exchange did decide to remove the corresponding $KCS from their balance to account for the user’s purchase of $MTV from the IEO, the user in question would have insufficient funds if they had made the decision to sell their remaining $KCS.

This resulted in the KuCoin exchange invalidating those trades and simply sending the $MTV back to the ‘pool’ of available funds from the IEO.

According to Gan, this was the reason why some users were able to obtain $MTV well after the conclusion of the token sale despite others being told that $MTV had already been sold out.

Notably, the revelation of this information caused even greater anguish among disgruntled users of the platform.

How Bots Were Used On KuCoin

Fortunately, Zerononcense is in consistent contact with its researchers and experts. Thus, Zerononcense was able to ascertain exactly how bots were able to take advantage of the platform’s setup to ensure that they could beat the rest of the (human-operated) crowd to purchase the tokens being offered by $MTV through their IEO.

According to Zerononcense researcher, ‘Robin’:

“Kucoin, just like a lot of other exchanges and modern sites work with client-side rendered websites. Basically, the server sends the layout and client code of the entire website at once and the client decides which components to render. What this implies is that the client knows how every component on the website looks, even if he doesn’t access it anywhere. All it took for the people in the Kucoin IEO was to look at all the client-side code and render the buy menu prematurely. At that point, they could fill it in upfront. Would probably only be a small amount of code that you could paste in your browser console, no fancy hacking involved.”

In laymen’s terms, KuCoin could have taken measures to prevent front running by bots on their platform.

Conclusion

Overall, when looking at the situation in its entirety, it is hard to call the KuCoin launch a ‘success’ of any sort. A significant number of users were made, an unfair and unethical ‘hack’ / ‘exploit’ was used to facilitate the purchase of nearly all of the tokens before regular users had a chance to purchase them, and KuCoin did not extract the $KCS that was used to purchase the $MTV token from account balances in a timely fashion, so even some of those that did purchase the $MTV tokens in time were denied the ability to keep them.

 

 

 

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