Key Takeaways:
The US Department of Justice (DoJ) and the Commodity Futures Trading Commission (CFTC) have charged cryptocurrency exchange KuCoin and its co-founders Chun Gan and Ke Tang for operating an illicit money laundering vehicle.
KuCoin Indicted by the DoJ and CFTC for Violation of Bank Secrecy Act and AML Laws
Federal prosecutors allege that while operating in the US, the exchange lied to investors about its operations, did not register its operations with US government entities, and failed to maintain an anti-money laundering program (AML).
In Tuesday’s indictment, the Justice Department said that since its launch in 2017, KuCoin’s founders operated the crypto trading platform as a money-transmitting business but did not implement a proper know-your-customer (KYC) or AML program for its over 30 million customers until last year. This violates the Bank Secrecy Act.
Even then, KuCoin only partially adopted the KYC process, requiring just the newly registered users to verify their identities while existing customers could continue using the platform anonymously on “unverified accounts”.
The DoJ also said that KuCoin failed to register as a money services business with the US Financial Crimes Enforcement Network.
KuCoin “Indirectly” Received $3.2 Million From Sanctioned Coin Mixer Tornado Cash
Prosecutors claimed that since it did not implement any KYC or AML measures, KuCoin “made itself available” to be used as an illicit money laundering vehicle, where billions in proceeds of suspicious and criminal activities, including from sanctions violations, darknet activities, and malware, ransomware, and fraud schemes were moved.
As per the indictment, KuCoin is said to have processed over $5 billion worth of transactions tied to illicit activities. Allegedly, over $4 billion in suspicious and criminal funds flowed out of the exchange since launch.
The DoJ also pointed out that KuCoin “indirectly” received more than $3.2 million in cryptocurrencies from the sanctioned crypto mixer platform Tornado Cash. The exchange was mentioned in the criminal filings against Tornado Cash developers Alexy Pertsev and Roman Storm.
The Commodity Futures Trading Commission (CFTC) also filed an indictment against KuCoin on Tuesday where it alleged that the company, which offers both spot and futures crypto trading services, did not register with the agency as a “futures commission merchant, swap execution facility, or designated contract market”.
KuCoin was also charged by the agency for not implementing its equivalent of a KYC program.
Prosecutors are Looking to Ban KuCoin in the United States
Darren McCormack, the Homeland Security Investigation Special Agent in charge of the case, called KuCoin “an alleged multibillion-dollar criminal conspiracy”. Meanwhile, US Attorney Damien Williams said in a statement that the crypto exchange actively tried to hide the fact that it has a substantial number of users from the country.
He highlighted that in failing to implement even the basic AML policies, the founders allowed KuCoin “to operate in the shadows of the financial markets and be used as a haven for illicit money laundering”.
Williams also said that KuCoin “deliberately” chose not to comply with the US law that helps in identifying and driving out crime and corrupt financing schemes.
The CFTC is seeking monetary penalties, trading and registration bans in the US, and an injunction, while the DoJ is seeking forfeiture alongside criminal penalties for KuCoin. The indictment comes just months after the DoJ, CFTC, and US Treasury Department settled similar charges against Binance – the world’s largest crypto exchange by trading volume.
