US Federal Prosecutors Charge KuCoin with Violating Anti-Money Laundering Laws

TL;DR

• KuCoin alongside two of its executives have been charged with violating AML laws in the United States.

• Its native KCS token has lost 14% of its value so far today. 

KuCoin Comes Under Fire in the United States

U.S. federal prosecutors charged crypto exchange KuCoin and two of its founders with violating anti-money laundering laws on Tuesday. According to the prosecutors, KuCoin operated in the United States, lied to at least one of its investors about operating in the country and also failed to register with US regulators. Finally, the crypto exchange was accused of failing to maintain an anti-money laundering program.

According to the U.S. Department of Justice, KuCoin and founders Chun Gan and Ke Tang operated the cryptocurrency exchange as a money-transmitting business with over 30 million customers. However, the company failed to implement a know-your-customer (KYC) or AML program until 2023. The DOJ maintained that even after rolling out its KYC and AML program, the crypto exchange did not apply it to the existing customers. At the moment, there has been no arrest, the DOJ added. 

The DOJ further added that KuCoin did not register with the U.S. Financial Crimes Enforcement Network as a money services business. They added that, 

“By failing to implement KYC or AML programs, KuCoin 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 highlighted allegations that the cryptocurrency exchange indirectly received a total of more than $3.2 million worth of cryptocurrency from Tornado Cash, a sanctioned crypto mixer. 

CFTC Also Goes After KuCoin

The Commodity Futures Trading Commission also filed a suit against KuCoin earlier today. According to the CFTC, KuCoin failed to register as a futures commission merchant, swap execution facility or designated contract market despite offering both spot and futures trading services in the United States.

The regulator also charged the crypto exchange with failure to implement the CFTC's equivalent of a KYC program. The CFTC is pursuing monetary penalties, trading and registration bans and an injunction. Meanwhile, the DOJ is seeking forfeiture alongside criminal penalties.

While commenting on this latest development, Homeland Security Investigations Special Agent in Charge Darren McCormack termed KuCoin an alleged multibillion-dollar criminal conspiracy, adding that it is one of the biggest cryptocurrency exchanges in the world. 

According to U.S. Attorney Damien Williams, the crypto exchange actively tried to hide that it has a substantial number of US users on its platform.

"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. 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."

KCS, KuCoin’s native token has lost 14% of its value following the announcement. At press time, KCS is trading at $12.30 per coin.