DOJ Charges KuCoin Founders for Money Laundering Violations

Key Insights:

  • The DOJ has accused KuCoin and its founders of deliberately avoiding US anti-money laundering laws to facilitate criminal funds.
  • Founders Chun Gan and Ke Tang could face up to five years in prison if convicted of the charges against them.
  • Despite settling with the New York AG for $22 million, KuCoin’s legal troubles escalate with these federal charges.

The United States Department of Justice (DOJ) has formally accused the cryptocurrency exchange KuCoin, along with its founders Chun Gan and Ke Tang, of engaging in practices that allegedly breach anti-money laundering (AML) regulations. 

The founders, known by their aliases “Michael” and “Eric,” respectively, are now facing serious charges that could lead to significant prison time if they are convicted. Specifically, they are charged with conspiring to operate without the proper license and failing to adhere to the Bank Secrecy Act.

According to the US Attorney for the Southern District of New York, Damian Williams, KuCoin deliberately obscured the fact that a substantial portion of its user base was comprised of US traders, thereby skirting Anti-Money Laundering (AML) regulations and Know-Your-Customer (KYC) requirements. Williams stated, “KuCoin and its founders deliberately sought to conceal the fact that substantial numbers of US users were trading on KuCoin’s platform.”

The indictment alleges that KuCoin, under the leadership of Gan and Tang, facilitated the transmission of over $4 billion in suspicious funds while receiving more than $5 billion, positioning itself as a hub for illicit financial activities. The DOJ claims that KuCoin actively solicited business from US customers but failed to implement adequate AML policies, thereby allowing it to operate “in the shadows of the financial markets.”

Furthermore, the investigation reveals that KuCoin, until July 2023, had no mandatory customer identification protocols in place, implementing a belated KYC program only after being alerted to the federal probe. Even then, the program applied solely to new customers, leaving existing ones, including a significant number from the United States, unchecked.

Despite a previous settlement with the New York Attorney General, which saw KuCoin paying $22 million and agreeing to cease operations in New York, the cryptocurrency exchange now faces federal prosecution. 

The indictment also emphasizes KuCoin’s substantial growth and its position as a major player in the global cryptocurrency market. Despite boasting over 30 million customers and a significant daily trading volume, the exchange is accused of neglecting its legal obligations to register with relevant US regulatory bodies, including the Financial Crimes Enforcement Network (FinCEN) and the Commodity and Futures Trading Commission (CFTC).

This case against KuCoin marks a continued effort by US authorities to clamp down on cryptocurrency exchanges that fail to comply with AML and KYC regulations. It follows a similar case involving Binance, another major cryptocurrency exchange. Binance’s settlement with the DOJ included changes in leadership, with Changpeng Zhao stepping down amidst accusations mirroring those now facing KuCoin.

If convicted, Gan and Tang, both Chinese citizens, 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.

Following the revelation of the DOJ charges against KuCoin and its founders, the exchange’s native token, KCS, has witnessed a notable downturn. As of this writting, KCS is valued at $12.45, marking a noteworthy decline of 10% in just one hour after the news broke.

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