Smaller Crypto Exchanges Accused of Using Platform Tokens to Lock In User Funds

A former employee of three crypto exchanges, WebSea, JuCoin, and CoinUP, has come forward with allegations that some smaller platforms use their native tokens to attract user funds and then restrict withdrawals.

The employee claimed that these exchanges employ a mix of strategies, including rising platform token prices, discounted token sales, high-yield products, copy trading, and multi-tier agent structures, to keep user funds tied to their platforms.

According to the allegations, during WebSea's 2024 crisis, ordinary users faced withdrawal restrictions while employees could still access their funds. At JuCoin, withdrawals exceeding the original deposit amount were reportedly difficult to get approved, and profits were sometimes deducted. At CoinUP, some team leaders or agents were allegedly required to purchase the platform token CPX, whose price later plunged.

The former employee warned users to be cautious about claims of principal protection, high returns, and discounted token sales, as these could be red flags in a bear market. The allegations highlight the need for users to conduct thorough due diligence before choosing a platform.