The United States sues KuCoin, accusing it of violating anti-money laundering laws, etc.

Source: Carbon Chain Value

On March 26, according to official news from the U.S. Department of Justice, the crypto exchange KuCoin and its two founders were charged with violating the Bank Secrecy Act and without permission. The crime of fund remittance. KuCoin and its founders Chun Gan and Ke Tang were indicted by the U.S. Attorney’s Office for the Southern District of New York for violating U.S. anti-money laundering laws and operating an unlicensed money transfer business. Charges include conspiracy to operate an unlicensed money transfer business and violating the Bank Secrecy Act by failing to maintain adequate anti-money laundering procedures to prevent money laundering and terrorist financing. KuCoin is accused of leveraging its large user base in the United States to become one of the largest cryptocurrency exchanges in the world without complying with U.S. legal requirements.

According to public information, KuCoin was founded in 2017. A futures trading platform was launched in July 2019. As of now, KuCoin has become one of the largest crypto exchanges in the world, with more than 30 million customers and billions of dollars worth of daily trading volume. KuCoin ranks among the top five in the world in public crypto exchange rankings. One of the public rankings ranks KuCoin as the fourth largest cryptocurrency derivatives exchange and the fifth largest cryptocurrency spot exchange.

According to the latest reports from foreign media, the U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement lawsuit with the U.S. District Court for the Southern District of New York, accusing Mek Global Limited, PhoenixFin PTE Ltd., Flashdot Limited and Peken Global Limited. They jointly operated a centralized digital asset exchange called KuCoin and repeatedly violated the Commodity Exchange Act and CFTC regulations. In its ongoing litigation against KuCoin, the CFTC seeks restitution of disgorgement, civil penalties, permanent trading and registration bans, and a permanent injunction against further violations of CEA and CFTC regulations.

Up to now, KuCoin official responded through the KuCoin respects the laws and regulations of various countries and strictly abides by compliance standards.

The following is the full text of the indictment from the U.S. Attorney’s Office for the Southern District of New York. for reference only.

KuCoin and its two founders, Chun Gan and Ke Tang, ignored U.S. anti-money laundering laws and developed KuCoin into one of the largest cryptocurrency exchanges in the world.

Damian Williams, U.S. Attorney for the Southern District of New York, and Darren McCormack, Acting Special Agent in Charge of the New York Division of Homeland Security Investigations (HSI), announced the targeting of the global cryptocurrency exchange KuCoin and its two founders-CHUN GAN. (aka Michael) and KE TANG (aka Eric) -- have been unsealed and charged with conspiring to operate an unlicensed money transmitting business and conspiring to violate the Bank Secrecy Act by knowingly failing to maintain measures intended to prevent KuCoin from being used for An adequate anti-money laundering (AML) program for money laundering and the financing of terrorism, failure to maintain reasonable procedures for verifying customer identities, and failure to submit any suspicious activity reports. In addition, KuCoin was accused of operating an unlicensed remittance business and material violations of the Bank Secrecy Act. GAN and TANG are still at large.

U.S. Federal Prosecutor Damian Williams said: As alleged in today’s indictment, KuCoin and its founders deliberately concealed the fact that a large number of U.S. users were trading on the KuCoin platform. In fact, KuCoin has been accused of leveraging its massive U.S. customer base to become one of the largest cryptocurrency derivatives and spot exchanges in the world, with billions of dollars in daily trading volume and trillions of dollars in annual trading volume. However, financial institutions like KuCoin that take advantage of the unique opportunities in the United States must also comply with U.S. laws to help identify and eliminate criminal and corrupt financing schemes. Allegedly, KuCoin deliberately chose not to do this. It is alleged that because the defendants did not even implement basic anti-money laundering policies, they allowed KuCoin to operate in the shadows of the financial markets and be used as a safe haven for illegal money laundering, with KuCoin receiving more than $5 billion in suspicious and criminal funds and remitting more than $4 billion in suspicious and criminal funds. Cryptocurrency exchanges like KuCoin can’t have it both ways. Today’s indictment should send a clear message to other cryptocurrency exchanges: if you plan to serve U.S. customers, you must comply with U.S. law, plain and simple.

HSI Acting Special Agent in Charge Darren McCormack said: "Today, we revealed what one of the world's largest cryptocurrency exchanges is really like: an alleged multi-billion dollar criminal conspiracy. Although KuCoin has been accused of failing to comply with laws necessary to ensure the security and stability of the world’s digital banking infrastructure, it continues to serve more than 30 million customers. The defendants’ alleged pattern of circumventing these vital laws is finally over. I commend HSI New York El Dorado Task Force and our law enforcement partners for their commitment to the mission.

According to the allegations in the indictment and KuCoin’s statements on its website:

FLASHDOT LIMITED (formerly Phoenixfin Limited), PEKEN GLOBAL LIMITED and PHOENIXFIN PRIVATE LIMITED are three entities doing business under the name of global cryptocurrency exchange KuCoin. GAN, TANG and others founded KuCoin in September 2017.

KuCoin solicits business from U.S. customers through its spot trading platform and later its futures trading platform launched in July 2019. Since its founding in 2017, KuCoin has become one of the largest cryptocurrency exchange platforms in the world, with more than 30 million customers and billions of dollars worth of daily cryptocurrency trading volume. The KuCoin website ranks among the top five in the world in public rankings of cryptocurrency exchanges. One of the public rankings ranks KuCoin as the fourth largest cryptocurrency derivatives exchange and the fifth largest cryptocurrency spot exchange. KuCoin, GAN, and TANG attempt to serve, and in fact already do, serve numerous customers located in the United States and the Southern District of New York.

Accordingly, at all relevant times, KuCoin was a money transmitting business required to register with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), and as of July 2019, KuCoin became a money transmitting business required to register with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). A futures commission merchant registered with the Commodity and Futures Trading Commission (CFTC). As a remittance business and futures commission merchant, KuCoin must comply with applicable Bank Secrecy Act provisions requiring the maintenance of appropriate anti-money laundering programs, including customer identity verification or KYC processes. Anti-money laundering and KYC programs ensure that financial institutions such as KuCoin are not used for illegal purposes such as money laundering.

GAN, TANG, and KuCoin were aware of their U.S. anti-money laundering obligations but deliberately chose to ignore these requirements. For example, KuCoin does not implement a proper KYC program. In fact, KuCoin will not ask customers to provide any identifying information until at least July 2023. It was not until July 2023, after KuCoin was notified of a federal criminal investigation into its activities, that KuCoin belatedly adopted KYC procedures for new customers. However, this KYC procedure only applies to new customers and does not apply to KuCoin’s millions of existing customers, including a large number of those located in the United States. KuCoin has also never filed any suspicious activity reports as required, has never registered as a futures commission merchant with the U.S. Commodity Futures Trading Commission, and has never registered with FinCEN as a remittance business until at least the end of 2023.

In fact, GAN, TANG, and KuCoin attempted to conceal the existence of KuCoin’s U.S. customers, making it appear that KuCoin was not subject to U.S. anti-money laundering and KYC requirements. Although KuCoin collects and tracks the location information of its customers, KuCoin actively prevents its U.S. customers from identifying themselves when opening KuCoin accounts. In 2022, KuCoin lied to at least one investor about the location of its customers, falsely claiming that it had no U.S. customers, when in fact, KuCoin had a large U.S. customer base. In fact, in some social media posts, KuCoin actively promotes itself to US customers as an exchange where they can trade without undergoing KYC. For example, KuCoin posted on Twitter in April 2022 that "US users do not support KYC, but KuCoin does not require users to perform KYC. Normal transactions can be completed using unverified accounts."

Because KuCoin deliberately fails to maintain required anti-money laundering and KYC programs, KuCoin has been used as a tool to launder a large number of criminal proceeds, including those obtained from darknet markets and malware, ransomware, and fraud schemes income. Since its inception in 2017, KuCoin has received more than $5 billion in suspicious and criminal proceeds and remitted more than $4 billion in suspicious and criminal proceeds. Many KuCoin customers exclusively use its trading platform because of the anonymity of the services it offers. In other words, KuCoin’s no-KYC policy is integral to its growth and success.

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GAN and TANG, both Chinese nationals, were charged with one count each of conspiring to violate the Bank Secrecy Act and one count of conspiring to operate an unlicensed money transfer business The charges carry a maximum penalty of five years in prison for each count.

FLASHDOT LIMITED (an entity incorporated in the Cayman Islands), PEKEN GLOBAL LIMITED (an entity incorporated in the Republic of Seychelles) and PHOENIXFIN PRIVATE LIMITED (an entity incorporated in Singapore, collectively KuCoin) were each charged with one count of conspiring to violate the Bank Secrecy Act, which is punishable by up to five years in prison; one count of conspiring to operate an unlicensed money transmission business, which is punishable by up to five years in prison; and one count of violating the Bank Secrecy Act. Secrecy Act, which is punishable by up to ten years in prison; and one count of operating an unlicensed money transmission business, which is punishable by up to five years in prison.

The maximum potential sentence in this case is set by Congress and is for reference only. Any sentence imposed on the defendant will be determined by the judge.

Mr. Williams praised the HSI New York El Dorado Task Force for its excellent investigative work. Mr. Williams also expressed his gratitude to the Commodity Futures Trading Commission, which today filed a parallel civil lawsuit against KuCoin.

This matter is being handled by the Office’s Illicit Finance and Money Laundering Unit. Assistant U.S. Attorneys Emily Deininger and David R. Felton are in charge of the prosecution.

The charges contained in the indictment are merely accusations, and the defendants are presumed innocent unless proven guilty.