KuCoin Exchange and founders charged with AML law violations by U.S. prosecutors

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26th March 2024 – (Hong Kong) U.S. Federal prosecutors have levelled serious accusations against the cryptocurrency exchange KuCoin, alongside its two founders, for contravening anti-money laundering (AML) regulations. The allegations assert that the exchange operated within U.S. borders, misled at least one investor about its activities in the country, and failed to register with American regulatory bodies or to establish an AML program.

According to the indictment released by the U.S. Department of Justice, KuCoin, spearheaded by founders Chun Gan and Ke Tang, conducted business as a money transmission entity, catering to a customer base exceeding 30 million. However, it did not incorporate a Know-Your-Customer (KYC) or AML framework until 2023, and even then, the measures were not extended to pre-existing customers. The DOJ confirmed that neither Gan nor Tang had been detained.

The Department of Justice’s indictment further disclosed that KuCoin had not undertaken the necessary registration with the U.S. Financial Crimes Enforcement Network as a money services operation. This oversight, the indictment suggests, rendered the exchange a conduit for laundering funds acquired through dubious and criminal undertakings, including sanctions breaches, darknet transactions, and various cybercrime revenues.

Simultaneously, the Commodity Futures Trading Commission (CFTC) has filed a legal action against KuCoin. The charges include the exchange’s failure to register as a futures commission merchant, a swap execution facility, or a designated contract market. The CFTC also highlighted KuCoin’s lack of a KYC protocol akin to its own.

In the wake of these developments, Darren McCormack, Special Agent in Charge at Homeland Security Investigations, referred to KuCoin as “an alleged multibillion-dollar criminal conspiracy” and underscored its stature as one of the largest crypto exchanges. U.S. Attorney Damien Williams emphasised in his statement that KuCoin had actively concealed the extent of its U.S. user base’s trading activity.

Williams expounded on the allegations, stating, “KuCoin capitalised on its substantial U.S. customer base to become one of the world’s premier cryptocurrency derivatives and spot exchanges, facilitating daily trades worth billions and annual trade volume in the trillions.” He continued, “The failure to implement elementary AML policies has allegedly allowed KuCoin to become a sanctuary for the laundering of illicit funds, with over $5 billion received and more than $4 billion dispatched in suspicious and criminal transactions.”

The market’s reaction to these charges saw a decline in KuCoin’s native token (KCS), which fell by 5%. Bitcoin (BTC) also experienced a slight drop of 1% in its price amidst volatility, hovering around the $70,000 mark.