Yesterday (26th) evening, the U.S. Department of Justice released heavy news that KuCoin, one of the top ten centralized cryptocurrency exchanges in the world, and its founders Chun Gan and Ke Tang were prosecuted by the U.S. Attorney’s Office for the Southern District of New York. The reason is that KuCoin and its two founders violated U.S. anti-money laundering norms and operated an unlicensed currency transmission business.
Founded in 2017, KuCoin is one of the largest cryptocurrency trading platforms in the world, with its trading volume now exceeding 30 million customers and daily trading volume of billions of dollars worth of cryptocurrencies. Subsequently, KuCoin solicited business from U.S. customers through its spot trading platform and its futures trading platform launched in July 2019.
As a currency transmitter and futures commission merchant, KuCoin must comply with applicable Bank Secrecy Act provisions requiring the maintenance of appropriate anti-money laundering programs, including customer identity verification or know-your-customer (KYC) processes.
However, according to the charges, it was not until July 2023 that KuCoin belatedly adopted a KYC program for new customers after it was notified of a federal criminal investigation into its activities, and this KYC process only applied to new customers. Millions of existing customers, including a large number in the United States, were not included in the process.
In addition, KuCoin has never filed any required suspicious activity reports, has never been registered as a futures commission merchant with the U.S. CFTC, and, at least until the end of 2023, has never been registered with FinCEN as a remittance business.
Due to KuCoin's deliberate failure to maintain required AML and KYC programs, KuCoin has been used as a vehicle to launder large amounts of criminal proceeds, including proceeds from darknet markets and malware, ransomware, and fraud schemes. Since its inception in 2017, KuCoin has received more than $5 billion in suspicious and criminal proceeds and sent more than $4 billion in suspicious and criminal proceeds.
U.S. Attorney Damian Williams said: “As alleged in the indictment, KuCoin and its founders intentionally concealed the fact that large numbers of U.S. users were transacting on the KuCoin platform. … Exploits like KuCoin’s Financial institutions in the United States must comply with U.S. laws to help identify and eliminate criminal and corrupt financing schemes, but KuCoin deliberately chose not to do so. … The indictment should send a clear message to other cryptocurrency exchanges if the scheme is When providing services to U.S. customers, they must abide by U.S. laws, plain and simple."
At the same time, the U.S. Commodity Futures Trading Commission (CFTC) also filed a civil lawsuit in the U.S. District Court for the Southern District of New York, accusing KuCoin of multiple violations of the Commodity Exchange Act (CEA) and CFTC regulations.
The indictment alleges that KuCoin illegally engaged in over-the-counter commodity futures trading and leveraged, margined or financed retail commodity trading; failed to solicit and accept commodity futures, swaps and leveraged, margined or financed retail commodities without registering as a futures commission merchant (FCM) with the CFTC. Commodity trading orders. In the lawsuit against KuCoin, the CFTC said it is seeking restitution of ill-gotten gains, civil penalties, permanent trading and registration bans, and a permanent injunction against further violations of CEA and CFTC regulations.
After the news of the prosecution was exposed, some community members were worried whether it would trigger a withdrawal run on the exchange and whether the safety of customers' funds would be threatened?
In response, KuCoin responded quickly at 23:40 last night, saying: KuCoin operates well and our users’ assets are absolutely safe. We are aware of the reports and are currently investigating the details through our attorneys. KuCoin respects the laws and regulations of various countries and strictly abides by compliance standards. So far, we have indeed heard users in the community complain that the speed of asset withdrawals has become very slow, but except for some currencies, it seems that withdrawals have not been suspended.
Regarding the accusations made by the U.S. Department of Justice and CFTC, some community users said that this may be a deliberate suppression of exchanges by U.S. regulators. Everything that KuCoin encounters is related to the United States and its customers, so it will not affect its global market. This skepticism is not uncommon in the cryptocurrency community, as U.S. regulation of the cryptocurrency space has been contentious.
According to past experience, if KuCoin wants to continue operating, it may reach a settlement with U.S. regulators, pay fines, and withdraw from the U.S. market, but everything needs to be continuously observed.
However, KuCoin has not yet provided a detailed explanation on this matter, only ensuring that the exchange is operating normally. It is unclear whether KuCoin will reach a settlement, pay a fine, and withdraw from the U.S. market. It remains to be seen what impact this incident will have on the encryption market.
It is worth mentioning that KuCoin was sued by New York Attorney General Letitia James as early as March last year. It was accused of being a cryptocurrency trading platform that allows investors to trade cryptocurrencies, including ETH, through websites and applications. , LUNA and other cryptocurrencies...KuCoin reached a settlement with the New York State Department of Justice at the end of last year, paying a total fine of US$22 million and agreeing to withdraw from the New York market.
Summarize
Due to the long-term lack of a clear legal and regulatory framework, crypto exchanges have mostly followed the law of the jungle and grown wildly. The existence of "black history" is a common phenomenon and a reasonable result of market operation. The fundamental reason is that the rapid development of the encryption industry exceeds the pace of supervision.
Nowadays, the encryption industry has grown into a market that cannot be ignored. From the perspective of the United States, it will not allow such a large market to be completely outside its control. On the one hand, it is to avoid uncontrollable risks, and on the other hand, it is also necessary to obtain benefits in this market. One characteristic of U.S. law is that the traceability period is very long. This is also the reason and confidence that regulatory agencies can file lawsuits against the "black history" of crypto trading platforms.
In the future, it can be expected that the supervision of crypto-asset institutions by US regulatory authorities will become more systematic, standardized and refined, and regulatory policies will be more complete, especially in terms of consumer and investor protection, and more detailed rules may be introduced. and measures.
