April 22, 2024

U.S. Authorities Charge KuCoin and Founders with Money Laundering Violations

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U.S. federal prosecutors have brought charges against cryptocurrency exchange KuCoin and two of its founders, alleging violations of anti-money laundering laws. The indictment accuses KuCoin of operating in the U.S. without proper registration and failing to implement necessary anti-money laundering (AML) programs.

According to the U.S. Department of Justice (DOJ), KuCoin, along with founders Chun Gan and Ke Tang, operated as a money-transmitting business serving over 30 million customers. However, the exchange reportedly did not establish a know-your-customer (KYC) or AML program until 2023, and even then, the KYC program did not apply to existing customers. Despite the allegations, neither Gan nor Tang have been arrested.

The indictment further alleges that KuCoin failed to register with the U.S. Financial Crimes Enforcement Network (FinCEN) as a money services business, making itself vulnerable to being used for money laundering activities. Specifically, the exchange is accused of receiving over $3.2 million worth of cryptocurrency from Tornado Cash, a sanctioned crypto mixer. KuCoin’s involvement with Tornado Cash led to its mention in criminal filings against two of the mixer’s developers.

In addition to the DOJ charges, the Commodity Futures Trading Commission (CFTC) has filed a lawsuit against KuCoin, asserting that the exchange failed to register as a futures commission merchant, swap execution facility, or designated contract market. The CFTC suit also claims that KuCoin did not implement the required KYC program equivalent.

Both the DOJ and CFTC seek significant penalties against KuCoin, including monetary fines, trading bans, and injunctions. Homeland Security Investigations Special Agent in Charge Darren McCormack described KuCoin as “an alleged multibillion-dollar criminal conspiracy,” emphasizing its size and significance in the cryptocurrency exchange landscape.

U.S. Attorney Damien Williams highlighted KuCoin’s efforts to conceal its substantial U.S. user base and its role as a major cryptocurrency exchange. He stated that KuCoin’s failure to implement basic AML policies allowed it to operate in the shadows and facilitate illicit money laundering activities, involving billions of dollars in suspicious and criminal funds.

Following the announcement of the charges, KuCoin’s native token (KCS) experienced a 5% drop, while Bitcoin’s (BTC) price declined by 1%. These developments come shortly after similar charges were settled against Binance, the world’s largest cryptocurrency exchange, by the DOJ, CFTC, and Treasury Department.

Digital Assets Desk

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