- DOJ filed criminal charges against KuCoin and its founders for operating unlicensed money transmitter and violating Bank Secrecy Act
- Indictment alleges KuCoin enabled over $9B in money laundering by evading AML regulations and having weak KYC
- CFTC also filed parallel civil charges against KuCoin for illegally operating derivatives exchange and falsely claiming no U.S. customers
The Department of Justice (DOJ) has filed charges against major cryptocurrency exchange KuCoin and two of its founders for allegedly violating anti-money laundering laws. The indictment claims that KuCoin enabled over $9 billion to be laundered through its platform by evading U.S. regulations.
DOJ Charges Against KuCoin
The DOJ filed the indictment on Tuesday against KuCoin and founders Chun Gan and Ke Tang. The charges relate to operating an unlicensed money-transmitting business and violating the Bank Secrecy Act. Specifically, the DOJ alleges that KuCoin:
- Failed to maintain an adequate anti-money laundering program
- Did not have reasonable procedures to confirm customer identities
- Failed to file suspicious activity reports
According to the indictment, KuCoin falsely claimed to have no U.S. customers in order to avoid complying with AML and KYC regulations. In reality, KuCoin had a substantial U.S. customer base that it leveraged to become one of the world’s largest crypto exchanges.
Alleged Money Laundering Enabled by KuCoin
By not implementing proper AML and KYC programs, KuCoin left itself vulnerable to money laundering, the DOJ claims.
For example, from August 2022 to November 2023, around $32 million worth of crypto tied to sanctioned crypto mixer Tornado Cash passed through 197 KuCoin addresses.
The exchange was also allegedly used to launder millions of dollars stolen from U.S. banks and crypto exchanges between 2020 and 2022.
CFTC Also Files Charges
In addition to the DOJ charges, the Commodity Futures Trading Commission (CFTC) filed a parallel civil action against KuCoin on Tuesday.
The CFTC alleges that KuCoin illegally operated a derivatives exchange and falsely claimed that U.S. citizens could not use its platform. In reality, 20-50% of KuCoin’s customers were based in the U.S.
Conclusion
The crackdown on KuCoin marks the latest action by U.S. authorities against crypto exchanges for AML violations. It comes after Binance pleaded guilty and agreed to pay $1 billion in fines in November 2023.
KuCoin and its founders now face criminal charges carrying maximum 5 year prison sentences. The CFTC is also seeking monetary penalties and trading bans against the exchange.
