Gushiken Yona
KuCoin, the Seychelles-based crypto exchange platform and its founders, Chun Gan and Ke Tang, find themselves ensnared in a high-stakes legal battle with U.S. federal prosecutors. Accused brazenly of conspiring to run an unlicensed money-transmitting business and violating the Bank Secrecy Act, this unfolding saga takes another dramatic turn as the Commodity Futures Trading Commission initiates a parallel civil action against the cryptocurrency business.
In a stunning legal salvo fired across the bow of the cryptocurrency world, the U.S. Department of Justice (DOJ) unsealed an indictment on Tuesday. This entails serious charges against KuCoin and its founders, Chun Gan, also known as “Michael,” and Ke Tang, also known as “Eric.”
The DOJ alleged that KuCoin failed to maintain an adequate anti-money laundering (AML) program, neglected to implement proper procedures for verifying customer identities, and did not report suspicious activities as required.
Furthermore, the indictment claims that KuCoin deliberately circumvented U.S. Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. Despite having a substantial customer base in the U.S., KuCoin allegedly falsely asserted that it had no American clients.
The government also asserted that KuCoin’s platform was used to launder more than $9 billion. Additionally, the DOJ indictment disclosed that KuCoin did not register with the U.S. Financial Crimes Enforcement Network (FinCEN) as a money services business, adding another layer of complexity to its legal situation.
Moreover, the DOJ noted that because of KuCoin’s intentional neglect in maintaining essential Anti-Money Laundering (AML) and Know Your Customer (KYC) programs, the platform has allegedly been exploited as a conduit for laundering substantial amounts of illicit funds. These funds reportedly include proceeds from darknet markets, as well as earnings from malware, ransomware, and various fraudulent schemes.
Since its establishment in 2017, KuCoin has purportedly processed over $5 billion in incoming funds and disbursed over $4 billion in suspicious and criminal proceeds. A significant portion of KuCoin’s clientele was attracted to its platform precisely because of the anonymity it offered. Essentially, KuCoin’s lack of a KYC policy appears to have been a cornerstone of its growth and market success.
Gan, 34, and Tang, 39, both Chinese citizens, face charges that include conspiring to commit a breach of the Bank Secrecy Act and operate an unlicensed money-transmitting business. Each of these charges carries a maximum penalty of five years in prison.
The Commodity Futures Trading Commission (CFTC) initiated a parallel civil action against KuCoin on Tuesday, according to the DOJ.
U.S. Attorney Damian Williams has stated that the indictment reveals KuCoin and its founders’ deliberate efforts to conceal a significant portion of their U.S. user base. Despite this concealment, KuCoin allegedly leveraged its substantial U.S. customer base to position itself as one of the world’s leading cryptocurrency derivatives and spot exchanges. With billions of dollars in daily trades and trillions in annual trade volume, KuCoin’s rapid growth came with increased scrutiny.
“But financial institutions like KuCoin that take advantage of the unique opportunities available in the United States must also comply with U.S. law to help identify and drive out crime and corrupt financing schemes. 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, with KuCoin receiving over $5 billion and sending over $4 billion of suspicious and criminal funds. Crypto exchanges like KuCoin cannot have it both ways. Today’s Indictment should send a clear message to other crypto exchanges: if you plan to serve U.S. customers, you must follow U.S. law, plain and simple,” Williams said.
