Justice Department Charges KuCoin And Two Founders With ‘Multi-Billion Dollar Criminal Conspiracy’

KuCoin, one of the world’s largest crypto exchanges, and two of its founders were criminally charged Tuesday with conspiring to violate the Bank Secrecy Act by failing to maintain a compliant anti-money laundering program and operating an unlicensed money-transmitting business.

KuCoin Flouted Anti-Money Laundering Laws

The U.S. Department of Justice has lodged charges against KuCoin.

In a March 26 indictment, KuCoin and its founders Chun Gan and Ke Tang, both Chinese citizens, were charged with operating the Seychelles-headquartered exchange as a money-transmitting business with over 30 million customers, but intentionally failed to implement an Anti-Money Laundering program, leading to the platform being used for “money laundering and terrorist financing.”

“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,” said U.S. Attorney Damian Williams in a press statement.

Until July 2023, KuCoin did not require customers to provide any identifying details, and even after enabling a know-your-customer (KYC) program, it only applied to new customers and not to its existing ones.

“Indeed, KuCoin allegedly took advantage of its sizeable 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,” Williams continued.

Prosecutors alleged that the defendants did not register KuCoin as a money services business with the U.S. Financial Crimes Enforcement Network. They added that KuCoin barred its U.S. customers from identifying themselves as such when creating accounts and lied to at least one of its investors about not having any U.S.-based clients. The exchange’s founders remain at large, the government says.

CFTC Charges

The Commodity and Futures Trading Commission also initiated a parallel civil enforcement lawsuit against KuCoin on Tuesday. The CFTC alleged that KuCoin, which offers both spot and futures trading services, failed to register as a futures commission merchant. Additionally, the agency claimed KuCoin didn’t enforce the CFTC’s equivalent of a KYC program from July 2019 to June 2023. 

“Today, we exposed one of the largest global cryptocurrency exchanges for what our investigation has found it to truly be: an alleged multibillion-dollar criminal conspiracy,” posited the acting Special Agent in Charge of the New York Field Office of Homeland Security Investigations (HSI), Darren McCormack.

The CFTC said KuCoin also marketed to U.S. investors, citing influencer campaigns and industry conferences, including Consensus 2022 and Mainnet 2022.

Law Enforcement Crackdown On Crypto’s Bad Actors

The CFTC is seeking civil monetary penalties, trading and registration bans, as well as a permanent injunction, while the DOJ is seeking forfeiture alongside criminal penalties.

Tuesday’s crackdown on KuCoin and its founders marks just another day in office for U.S. authorities. Binance, the world’s largest crypto exchange by trading volume, in November 2023 pleaded guilty and agreed to pay $4.3 billion. The global exchange’s founder and former CEO, Changpeng “CZ” Zhao, also pled guilty to willfully violating the Bank Secrecy Act and resigned. CZ is currently in the U.S. awaiting sentencing on April 30.

Similarly, Sam Bankman-Fried, the founder of the now-defunct FTX exchange, will be sentenced on March 28 after his conviction on seven felony counts.

If convicted, KuCoin’s Gan and Tang could face a maximum sentence of five years in prison for each count of conspiring to violate the Bank Secrecy Act and conspiring to operate an unlicensed money-transmitting business.

KuCoin’s native token, KCS, has been impacted considerably following the disclosure of the news and the charges levied by the DOJ and CFTC. The KCS token crashed to $12.40 at press time, representing a 14.24% decline in the space of hours.