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One Of The World’s Largest Crypto Exchanges, KuCoin, Is Facing Charges For Anti-Money Laundering Violations

Updated: May 6

As reported by CoinDesk, on Tuesday, the U.S. Department of Justice (DOJ) charged KuCoin, a cryptocurrency exchange, and its two founders, Chun Gan and Ke Tang, with breaking anti-money laundering laws. The indictment alleges that the exchange, which operated in the United States, lied to at least one investor about its U.S. operations, failed to register with United States government entities, and did not maintain an anti-money laundering (AML) program for its over 30 million customers.

KuCoin and its founders were accused of running the exchange as a money-transmitting business without implementing a know-your-customer (KYC) or AML program until 2023. Even then, its KYC program did not apply to existing customers. Neither Gan nor Tang were arrested, according to the DOJ.

The indictment claimed that KuCoin, by not implementing any KYC or AML programs, "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 indictment also mentioned allegations that KuCoin indirectly received over $3.2 million worth of cryptocurrency from Tornado Cash, a sanctioned crypto mixer. KuCoin was named in criminal filings against two of Tornado Cash's developers, Alexey Pertsev and Roman Storm. The Commodity Futures Trading Commission (CFTC) also filed a suit against KuCoin on Tuesday, alleging that the company, which offers both spot and futures trading services, did not register as a futures commission merchant, swap execution facility, or designated contract market. The CFTC's suit also charged that KuCoin didn't implement its equivalent of a KYC program. The CFTC is seeking monetary penalties, trading and registration bans, and an injunction, while the DOJ is seeking forfeiture alongside criminal penalties.

Homeland Security Investigations Special Agent in Charge Darren McCormack

In a statement, Homeland Security Investigations Special Agent in Charge Darren McCormack called KuCoin "an alleged multibillion-dollar criminal conspiracy," noting that it was one of the largest crypto exchanges. 

U.S. Attorney Damien Williams said in a statement that KuCoin actively tried to hide that "substantial numbers of U.S. users were trading" on its platform.

"Indeed, KuCoin allegedly took advantage of its sizable U.S. customer base to become one of the world’s largest cryptocurrency derivatives and spot exchanges, with billions of dollars of daily trades and trillions of dollars of annual trade volume," he said." As alleged, in failing to implement even basic anti-money laundering policies, the defendants allowed KuCoin to operate in the shadows of the financial markets and be used as a haven for illicit money laundering, with KuCoin receiving over $5 billion and sending over $4 billion of suspicious and criminal funds."

Following the announcement, KuCoin's native token (KCS) dropped by 5%, while Bitcoin's (BTC) price dropped 1%. 

Tuesday's actions come just months after the DOJ, CFTC, and Treasury Department settled similar charges against Binance, the world's largest crypto exchange by trading volume.

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