In a significant development for the cryptocurrency industry, the United States Attorney for the Southern District of New York, Damian Williams, alongside Darren McCormack, Acting Special Agent in Charge of the New York Field Office of Homeland Security Investigations (HSI), have unveiled an indictment against the global cryptocurrency exchange KuCoin. The charges implicate two of its founders, Chun Gan and Ke Tang, in a multi-billion dollar criminal conspiracy, alleging the operation of an unlicensed money transmitting business and failure to comply with the Bank Secrecy Act.
The indictment alleges that KuCoin and its founders deliberately concealed the extent of their U.S. user base to operate outside of U.S. regulatory requirements. Despite KuCoin’s rapid growth to become one of the world’s largest cryptocurrency exchanges, with a substantial number of U.S. customers, the company is accused of willfully neglecting to implement adequate anti-money laundering (AML) policies. This lack of oversight purportedly allowed over $5 billion of suspicious and criminal funds to be received and over $4 billion to be sent through the platform.
U.S. Attorney Damian Williams stated, ‘KuCoin allegedly deliberately chose not to do so. 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.’ This statement underscores the gravity of the charges and the expectation that financial institutions engaging with U.S. markets adhere to U.S. laws.
The indictment also highlights that KuCoin did not require customer identification until July 2023, and even then, only for new customers. This belated adoption of a Know Your Customer (KYC) program did not extend to the millions of existing users, including those in the U.S. Furthermore, KuCoin is accused of actively marketing to U.S. customers while simultaneously attempting to obscure their presence to avoid regulatory scrutiny.
The legal entities FLASHDOT LIMITED, PEKEN GLOBAL LIMITED, and PHOENIXFIN PRIVATE LIMITED, collectively operating as KuCoin, along with founders Gan and Tang, face multiple charges. These include conspiring to violate the Bank Secrecy Act and operating an unlicensed money transmitting business, with each count carrying a maximum sentence of five years in prison. Additional counts could lead to even longer sentences if convicted.
The indictment serves as a stark reminder to the cryptocurrency industry that compliance with U.S. financial regulations is not optional. The charges against KuCoin and its founders represent a concerted effort by U.S. authorities to enforce the law and protect the integrity of the financial system from illicit activities.
With the case unfolding, the cryptocurrency community is closely watching the implications for other exchanges and the broader implications for the industry. The outcome of this legal battle could set a precedent for how cryptocurrency exchanges operate within the U.S. and globally, emphasizing the importance of regulatory compliance in the digital age.
The unsealing of this indictment against KuCoin and its founders marks a pivotal moment in the ongoing dialogue between the cryptocurrency industry and regulatory bodies. It is a clear message that the U.S. will actively pursue those who attempt to circumvent its laws, and it is a call to action for all exchanges to review and strengthen their AML and KYC procedures to ensure compliance and prevent the misuse of their platforms for criminal activities.
