Woofun AI reports that a former employee of WebSea, JuCoin, and CoinUP has alleged via Wu Blockchain that these platforms utilize native tokens to attract capital while subsequently restricting user withdrawals.

The deeper driver is a complex mix of strategies designed to keep funds tethered to the exchanges, including rising platform token prices, discounted token sales, high-yield products, copy trading, and multi-tier agent structures.

Notably, during WebSea's 2024 crisis, ordinary users faced withdrawal restrictions while employees retained access to their funds, highlighting a stark disparity in liquidity access.

Structurally, JuCoin reportedly made it difficult to approve withdrawals exceeding the original deposit amount, with profits sometimes being deducted from user accounts. At CoinUP, team leaders and agents were allegedly required to purchase the platform token CPX, whose price later plunged, trapping significant value within the ecosystem.

Per Woofun AI, these tactics become more prevalent in a bear market as smaller exchanges lean on platform tokens and high-yield products to draw in users despite underlying liquidity issues. The whistleblower warned that claims of principal protection and high returns serve as red flags, emphasizing the need for transparency and consumer protection through rigorous due diligence.

Regulatory bodies in various jurisdictions are increasingly focused on exchange practices, and these unverified allegations could prompt further scrutiny. This incident serves as a cautionary tale for crypto users, underscoring the importance of understanding token incentives and withdrawal policies to maintain trust in the industry.