The Department of Justice (DOJ) accuses KuCoin of functioning as a money-transmitting business catering to over 30 million customers without enforcing know-your-customer (KYC) or AML measures until 2023. Moreover, the newly implemented KYC program did not extend to existing customers, leaving significant regulatory gaps.
Although Chun Gan and Ke Tang have not been arrested, their failure to register KuCoin with the U.S. Financial Crimes Enforcement Network has led to serious legal repercussions. The duo were each charged with one count of conspiracy to violate the US Bank Secrecy Act and one count of conspiring to run a money transmitting business without the proper license.
“KuCoin made itself available to be used, and in fact was used, as a vehicle for laundering the proceeds of suspicious and criminal activities, including proceeds from sanctions violations, darknet markets, and malware, ransomware, and fraud schemes,” the statement reads.
The indictment further highlights KuCoin’s vulnerability to being exploited for laundering proceeds from various illegal activities, including sanctions violations and dark web operations. Specifically, KuCoin is alleged to have indirectly received over $3.2 million in cryptocurrency from the sanctioned crypto mixer Tornado Cash, linking the exchange to criminal cases against Tornado Cash developers Alexey Pertsev and Roman Storm.
Separately, the Commodity Futures Trading Commission (CFTC) filed a lawsuit against KuCoin for not registering as a futures commission merchant among other designations, and failing to implement a KYC equivalent. The CFTC seeks monetary penalties and bans, while the DOJ aims for forfeiture and criminal penalties.
Homeland Security Investigations highlighted the case’s severity, labeling KuCoin as part of a “multibillion-dollar criminal conspiracy” and one of the largest crypto exchanges globally. U.S. Attorney Damien Williams criticized KuCoin for its substantial, yet undisclosed, U.S. user base, which contributed to its status as a major player in the crypto market, facilitating billions in daily trades without basic AML policies.
Following these charges, KuCoin’s native token (KCS) dropped more than 5%, while Bitcoin saw a 1% decline amidst day-long volatility.
Today’s action against KuCoin represents the first instance the DOJ has pursued a cryptocurrency exchange since revealing a 4-billion-dollar settlement with Binance in December 2023. In the wake of the settlement, former CEO and founder Changpeng Zhao resigned and is scheduled for sentencing next month.
Source: Cryptocurrency - investing.com
