Startups

KuCoin and its founders charged with money laundering and facilitating billions in criminal activity

In a stunning development, the United States Department of Justice (DOJ) has indicted the cryptocurrency exchange KuCoin and two of its founders for purported violations of anti-money laundering (AML) laws. The charges stem from allegations that KuCoin failed to implement fundamental AML procedures, thereby allowing the exchange to become a conduit for laundering billions of dollars in criminal funds.

According to an announcement made on Tuesday, DOJ officials unsealed an indictment against KuCoin and its founders, Chun Gan and Ke Tang. The indictment accuses them of “conspiring to operate an unlicensed money transmitting business” and violating the Bank Secrecy Act. Shockingly, it’s claimed that KuCoin processed over $9 billion in suspicious funds since its inception in 2017.

Although neither Gan nor Tang has been apprehended, the DOJ alleged the two founders of “conspiring to operate an unlicensed money transmitting business” and violations of the Bank Secrecy Act, Notably, KuCoin allegedly targeted U.S. customers while asserting it had none, a strategy purportedly employed to evade regulatory oversight. However, it’s important to note that these are accusations. KuCoin has yet to provide a statement regarding the case.

Adding to the legal heat, the Commodity Futures Trading Commission (CFTC) filed a separate suit against KuCoin just a day prior, alleging the exchange failed to register as a futures commission merchant, swap execution facility, or designated contract market. The CFTC’s complaint also highlights KuCoin’s alleged negligence in implementing an equivalent to a Know Your Customer (KYC) program.

This development marks a significant escalation in regulatory scrutiny within the cryptocurrency space. With Bitcoin surging to unprecedented heights, the DOJ’s move indicates a renewed focus on compliance enforcement within the crypto ecosystem, reminiscent of its multi-billion dollar settlement with Binance last year.

In response to the allegations, KuCoin reassured users of the safety of their assets: “KuCoin is operating well, and the assets of our users are absolutely safe,” the exchange wrote.

“We are aware of the related reports and are currently investigating the details through our lawyers. KuCoin respects the laws and regulations of various countries and strictly adheres to compliance standards.”

Despite these reassurances, KuCoin’s native token, KCS, has taken a hit, shedding 12% of its value in the past 24 hours and currently trading at $12.64 at the time of publication.

This move by the DOJ marks the first instance of the agency targeting a cryptocurrency exchange since its headline-grabbing multi-billion dollar settlement with Binance in the preceding year. Some analysts suggest this could signal a renewed effort by authorities to inject uncertainty into the cryptocurrency ecosystem.

In a news release, U.S. Attorney Damian Williams said:

“As today’s Indictment alleges, KuCoin and its founders deliberately sought to conceal the fact that substantial numbers of U.S. users were trading on KuCoin’s platform.

Indeed, KuCoin allegedly took advantage of its sizeable U.S. customer base to become one of the world’s largest cryptocurrency derivatives and spot exchanges, with billions of dollars of daily trades and trillions of dollars of annual trade volume.  But financial institutions like KuCoin that take advantage of the unique opportunities available in the United States must also comply with U.S. law to help identify and drive out crime and corrupt financing schemes.  KuCoin allegedly deliberately chose not to do so. 

As alleged, in failing to implement even basic anti-money laundering policies, the defendants allowed KuCoin to operate in the shadows of the financial markets and be used as a haven for illicit money laundering, with KuCoin receiving over $5 billion and sending over $4 billion of suspicious and criminal funds. 

Crypto exchanges like KuCoin cannot have it both ways.  Today’s Indictment should send a clear message to other crypto exchanges: if you plan to serve U.S. customers, you must follow U.S. law, plain and simple.”

We’ve been closely tracking KuCoin’s journey in the crypto space since 2021. On March 9, 2023, we reported on the legal action taken against KuCoin by the state of New York, amid the US government’s intensified scrutiny of cryptocurrency firms. KuCoin stands as a prominent virtual currency trading platform, ranking as the fourth-largest cryptocurrency exchange globally.

Founded in 2013 by a cohort of blockchain enthusiasts with experience garnered from industry titans such as Ant Financial and GF Securities, KuCoin has steadily solidified its position in the market. The company recently joined a coveted unicorn club following a successful Series B funding round of $150 million that pushed its valuation to $10 billion.


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