DOJ Indictment Accuses KuCoin Crypto Exchange of Laundering $9 Billion and Violating Anti-Money Laundering Regulations

DOJ Indictment Accuses KuCoin Crypto Exchange of Laundering $9 Billion and Violating Anti-Money Laundering Regulations

DOJ Indictment Accuses KuCoin Crypto Exchange of Laundering $9 Billion and Violating Anti-Money Laundering Regulations

Accuses KuCoin Crypto Exchange of Laundering $9 Billion

The Department of Justice has brought charges against the cryptocurrency exchange KuCoin and its two co-founders, accusing them of breaching anti-money laundering regulations.

On Tuesday, the DOJ announced an indictment against KuCoin and its co-founders, Chun Gan and Ke Tang, for allegations of running a money-transmitting business without the proper license and contravening the Bank Secrecy Act. 

The Department criticized the exchange for not upholding an effective anti-money laundering framework, lacking “reasonable procedures” to verify the identities of its customers, and not submitting reports on suspicious activities.

According to the indictment, KuCoin knowingly bypassed U.S. anti-money laundering and know-your-customer rules by “falsely representing that it had no U.S. customers, whereas, in reality, KuCoin serviced a significant number of U.S. clients.” It’s alleged that the platform was used to launder more than $9 billion.

DOJ Indictment Accuses KuCoin Crypto Exchange of Laundering $9 Billion and Violating Anti-Money Laundering Regulations

“KuCoin allegedly capitalized on its substantial U.S. customer base to rank among the globe’s leading cryptocurrency exchanges, handling billions in daily transactions and achieving annual trading volumes in the trillions,” stated Damian Williams, the U.S. Attorney for the Southern District of New York. “However, financial entities like KuCoin, which reap the benefits of the U.S. market, are also required to adhere to U.S. laws aimed at detecting and preventing financial crimes and corruption. KuCoin allegedly chose to ignore these obligations.”

Additionally, the Commodity Futures Trading Commission has launched a civil lawsuit against KuCoin, as noted by the DOJ.

In response to inquiries, KuCoin referred to its statements on X, asserting, “#KuCoin is functioning smoothly, and our users’ assets are secure. We are looking into the matter with our legal team. KuCoin respects and strictly follows the legal and regulatory standards of various nations.”

KuCoin CEO Johnny Lyu, in a message on X, acknowledged the charges but assured that the exchange’s operations continue as normal. “We are addressing the issue, but our platform’s operations remain stable, and your assets are secure with us. We will keep you updated on our progress,” said Lyu.

The DOJ reported that co-founders Gan and Tang are currently not in custody. The accusations leveled against them—conspiring against the Bank Secrecy Act and operating an unlicensed money-transmitting enterprise—could lead to a maximum of five years in prison for each charge.

KuCoin, according to the Department of Justice, consistently failed to submit the necessary suspicious activity reports, did not register with the Commodity Futures Trading Commission (CFTC), and up until the end of 2023, did not sign up as a money transmitting business as mandated. This oversight led to KuCoin handling over $5 billion in incoming and more than $4 billion in outgoing transactions deemed “suspicious and criminal,” as per the DOJ.

The stance is clear from the DOJ: crypto exchanges like KuCoin cannot bypass the requirements. “This Indictment serves as a stark warning to other cryptocurrency exchanges: serving U.S. customers comes with the obligation to adhere to U.S. laws, without exception,” stated Attorney General Williams.

Until July 2023, KuCoin allowed users to trade without mandating any form of identification. It was only after being alerted to its non-compliance that KuCoin introduced a Know Your Customer (KYC) procedure for new sign-ups, leaving existing users unaffected, according to the DOJ.

KuCoin ranks as a significant player in the cryptocurrency exchange market, boasting around 30 million users across 207 countries and facilitating daily spot trading volumes surpassing $2.8 billion, as highlighted in the indictment.

This incident is not KuCoin’s first legal challenge. In March 2023, New York’s Attorney General Letitia James filed a lawsuit against the exchange for breaching state regulations on securities and commodities trading.

Moreover, the DOJ charges include allegations that Gan, Tang, and the exchange conspired to conceal their servicing of U.S. customers, falsely claiming exemption from the nation’s AML and KYC regulations. At one point, KuCoin misleadingly informed an investor about the geographical distribution of its customer base, falsely asserting it had no clients in the U.S.

Also Read, Philippine regulators are initiating measures to restrict local traders’ ability to use Binance

DAO Assets Surge by Over $20 Billion in 4 Months During Cryptocurrency Market Rally

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