The U.S. Attorney’s Office for the Southern District of New York, together with Homeland Security Investigations (HSI), revealed charges against global cryptocurrency exchange KuCoin and two of its founders, Chun Gan (also known as “Michael”) and Ke Tang (also known as “Eric”).
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These charges, announced in a press release on March 26, 2027, involve serious violations of U.S. financial regulations. The accusations include operating a money-transmitting business without a license and failing to comply with the Bank Secrecy Act. Specifically, the indictment alleges that KuCoin did not maintain an adequate anti-money laundering (AML) program.
U.S. Attorney Highlights KuCoin’s Alleged Wrongdoing
U.S. Attorney Damian Williams emphasized KuCoin and its founders’ deliberate actions to hide the participation of U.S. users on their platform. By leveraging this significant customer base, KuCoin reportedly expanded into one of the world’s largest cryptocurrency exchanges.
The absence of fundamental anti-money laundering (AML) policies, as stated in the press release, allegedly allowed KuCoin to become a conduit for illegal money laundering activities, involving more than $9 billion of suspicious and criminal funds.
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The press release provided insights into KuCoin’s operational framework, revealing purported disregard for U.S. legal obligations by Gan, Tang, and KuCoin. Allegations include the absence of a robust Know Your Customer (KYC) program until July 2023, failure to file suspicious activity reports, and failure to register with relevant U.S. regulatory bodies. These purported actions are said to demonstrate KuCoin’s systematic avoidance of U.S. anti-money laundering and customer identification protocols.
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KuCoin Accused of Masking U.S. Customer Base
The press release highlighted KuCoin’s active efforts to conceal its U.S. customer base, which included measures to prevent users from disclosing their location when creating accounts. Additionally, KuCoin allegedly misled investors about the geographical distribution of its customer base. These actions, deemed deceitful, were reportedly crucial to KuCoin’s strategy in attracting users seeking anonymity.
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The indictment against KuCoin, its founders, and associated entities represents a significant development in the regulation of cryptocurrency exchanges operating within and targeting the U.S. market. The charges carry substantial penalties, with individuals facing up to five years in prison for each count of conspiring to operate an unlicensed money-transmitting business and violating the Bank Secrecy Act. The entities collectively known as KuCoin face potentially harsher penalties across multiple charges.
U.S. Attorney Condemns KuCoin’s Alleged Wrongdoings
Concealment of U.S. User Base: U.S. Attorney Damian Williams emphasized KuCoin’s alleged deliberate attempts to hide the presence of significant numbers of U.S. users on its platform. KuCoin purportedly capitalized on its sizable U.S. customer base to become one of the world’s largest cryptocurrency derivatives and spot exchanges, with billions of dollars in daily trades and trillions of dollars in annual trade volume. However, Williams stressed that financial institutions operating in the U.S. must adhere to U.S. law to combat crime and corruption.
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Failure to Implement AML Policies: According to Williams, KuCoin allegedly chose not to implement even basic anti-money laundering (AML) policies. This failure purportedly allowed KuCoin to operate in the shadows of financial markets and be utilized as a haven for illicit money laundering. The indictment claims that KuCoin received over $5 billion and sent over $4 billion of suspicious and criminal funds.
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Clear Message to Crypto Exchanges: Williams stated that crypto exchanges like KuCoin cannot simultaneously benefit from serving U.S. customers while disregarding U.S. law. The indictment serves as a clear message to other crypto exchanges that if they intend to serve U.S. customers, they must comply with U.S. law without exception.
On-Chain Analysis by CryptoQuant CEO: In contrast, Ki Young Ju, founder and CEO of South Korea-based crypto analytics startup CryptoQuant, offered a different perspective, stating that “on-chain wise,” KuCoin is doing okay.
On-chain wise, @kucoincom is fine.$BTC and $ETH withdrawals surged, driven mainly by retail users, with a small impact on the overall reserve.
They appear to not commingle customers' funds and have sufficient reserves to process user withdrawals. pic.twitter.com/p4bJJpwnFJ
— Ki Young Ju (@ki_young_ju) March 27, 2024
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Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.