- The CFTC filed a complaint against KuCoin for allowing illegal commodity futures trading and failing to register with the regulator
- The CFTC claims KuCoin allowed $4B in suspicious funds and made $5B skirting US regulations, seeking penalties and injunctions
- The CFTC complaint calls ether a commodity, suggesting it views ether as under its jurisdiction like bitcoin
The Commodity Futures Trading Commission (CFTC) recently filed a complaint against crypto exchange KuCoin, accusing it of illegally dealing in commodity futures and failing to register with the regulator. This comes after the Department of Justice also targeted KuCoin for anti-money laundering violations.
CFTC Allegations Against KuCoin
The CFTC alleges that from July 2019 to June 2023, KuCoin allowed US customers to trade commodity futures and derivatives without implementing know-your-customer (KYC) procedures. The KYC procedures it eventually adopted were a “sham” that failed to prevent illegal trading, according to the regulator.
As a result, the CFTC claims that KuCoin transmitted over $4 billion in suspicious funds and received over $5 billion by skirting US regulations. The regulator is now seeking monetary penalties, permanent bans, and injunctions against KuCoin for violating the Commodity Exchange Act.
CFTC Says Ether is a Commodity
Notably, in its complaint against KuCoin, the CFTC stated that the exchange allowed trading in commodities including bitcoin, ether, and litecoin. This suggests the regulator views ether as a commodity, similarly to bitcoin. This falls in line with previous statements by CFTC leadership that ether is likely a commodity. Calling ether a commodity brings it under the CFTC’s jurisdiction.
Prior Government Action Against KuCoin
In December 2022, KuCoin settled with the New York Attorney General’s office for $22 million over allegations that it operated illegally in the state. The Department of Justice’s recent lawsuit similarly accused KuCoin of violating the Bank Secrecy Act by failing to enforce anti-money laundering rules.
Conclusion
The dual regulatory actions by the CFTC and DOJ signal greater scrutiny of crypto exchanges and their AML procedures. Exchanges that operate in the US will need to register with regulators and comply with Know-Your-Customer rules to avoid potential lawsuits and penalties.
