Smaller Exchanges Accused of Using Tokens to Restrict User Withdrawals

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

The ex-employee, who claims to have worked at WebSea, JuCoin, and CoinUP, said these tactics are designed to incentivize users to deposit and hold assets, but may also make it harder to withdraw them later.

The person alleged that 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.

The ex-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 when some smaller exchanges may lean more heavily on platform tokens and high-yield products to draw in users.