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Crypto Exchange KuCoin Violated Anti-Money Laundering Laws and US Charges
U.S. federal prosecutors on Tuesday charged cryptocurrency exchange KuCoin and two of its founders with violating anti-money laundering laws, saying the exchange operated in the United States, lied to at least one of its investors regarding its operations in the United States and had failed to register in the United States. government entities and maintain an anti-money laundering program.
The US Department of Justice said in an indictment alleging that KuCoin and founders Chun Gan and Ke Tang operated KuCoin as a money transfer business with more than 30 million customers, but did not implement a know-your-customer program (KYC) or AML until 2023 – and even then, its KYC program did not apply to existing customers. Neither Gan nor Tang have been arrested, the DOJ said in a press release.
The DOJ indictment states that KuCoin failed to register with the U.S. Financial Crimes Enforcement Network as a money services business.
Because it did not implement any KYC or AML program, KuCoin “made itself available for use, and in fact was used, as a vehicle to launder the proceeds of suspicious and criminal activities, including proceeds from sanctions violations, darknet markets and malware. “, ransomware and fraudulent schemes,” the indictment states.
The indictment cited allegations that KuCoin “indirectly received a total of more than $3.2 million in cryptocurrency from Tornado Cash,” a sanctioned crypto mixer. KuCoin was mentioned in criminal proceedings against two of Tornado Cash’s developers, Alexey Pertsev (whose trial in the Netherlands began earlier Tuesday) and Roman Storm (who is expected to stand trial in the United States later this year).
The Commodity Futures Trading Commission also deposit a lawsuit against KuCoin on Tuesday, alleging that the company, which offers both spot and futures trading services, failed to register as a futures commission trader, swap execution center or designated contract market. His suit also accused KuCoin of failing to implement the equivalent of a CFTC KYC program.
The CFTC is seeking monetary penalties, trade and registration bans, and an injunction, while the DOJ is seeking forfeiture as well as criminal sanctions.
In a statement, Homeland Security Investigations Special Agent in Charge Darren McCormack called KuCoin an “alleged multibillion-dollar criminal conspiracy,” noting that it was one of the largest crypto exchanges.
U.S. Attorney Damien Williams said in a statement that KuCoin actively attempted to hide that “a significant number of U.S. users were transacting” on its platform.
“Indeed, KuCoin has reportedly leveraged its large US customer base to become one of the largest cryptocurrency derivatives and spot exchanges in the world, with billions of dollars in daily transactions and billions of dollars in trading volume. “annual exchanges”, he declared. By failing to implement even basic anti-money laundering policies, defendants allowed KuCoin to operate in the shadows of financial markets and be used as a safe haven for illicit money laundering, KuCoin receiving more than $5 billion and sending more than $4 billion in suspicious money and criminal funds. »
KuCoin’s native token (KCS) fell 5% following the announcement. Bitcoin (BTC) the price fell 1% but was volatile throughout the day and is trading around $70,000.
UPDATE (March 26, 2024, 3:25 p.m. UTC): Adds additional details.
UPDATE (March 26, 3:40 p.m. UTC): Adds more details from CFTC and DOJ filings.