Home Mutual Funds KuCoin, Execs Charged With Bank Secrecy Act and Unlicensed Money Transmission Offenses

KuCoin, Execs Charged With Bank Secrecy Act and Unlicensed Money Transmission Offenses

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Key Takeaways

  • Cryptocurrency exchange KuCoin and two of its founders have been charged with violations of the Bank Secrecy Act.
  • The exchange is accused of skirting U.S. regulations in an effort to quickly expand its user base.
  • KuCoin is said to have received more than $5 billion and sent more than $4 billion of suspicious funds.
  • The lawsuit against KuCoin is similar to past charges against crypto exchanges BitMEX and Binance.

Global cryptocurrency exchange KuCoin and two of its founders have been indicted on criminal charges of operating without a license for transmitting money and failing to establish an anti-money laundering (AML) program in accordance with the Bank Secrecy Act (BSA).

KuCoin is accused by the U.S. Attorney’s Office for the Southern District of New York of neglecting to verify the identities of its customers adequately or to report any suspicious activities. The BSA mandates that financial platforms implement stringent measures for identifying their customers and reporting any transactions that could suggest criminal activities.

Other international crypto exchanges, such as Binance and BitMEX, have faced similar charges in the past.

KuCoin’s founders, Chun Gan and Ke Tang, are alleged to have concealed their platform’s significant engagement with U.S. traders. According to U.S. authorities Tuesday, this strategy allowed KuCoin to amass more than 30 million customers and billions of dollars in daily trades because it didn’t follow the legal obligations in place for financial institutions operating within or targeting the U.S. market.

Overall, KuCoin is accused of facilitating the laundering of more than $5 billion in suspicious funds via deposits and $4 billion via withdrawals.

“As [Tuesday’s] Indictment alleges, KuCoin and its founders deliberately sought to conceal the fact that substantial numbers of U.S. users were trading on KuCoin’s platform,” U.S. Attorney Damian Williams said in a statement. “Indeed, KuCoin allegedly took advantage of its sizeable U.S. customer base to become one of the world’s largest cryptocurrency derivatives and spot exchanges, with billions of dollars of daily trades and trillions of dollars of annual trade volume.”

The charges also underscore an allegedly deliberate attempt by KuCoin and its founders to operate outside of the global financial regulatory structure. By actively disguising the presence of its U.S. clientele and misleading investors about the geographic distribution of its customer base, KuCoin sought exemption from the stringent AML and Know Your Customer (KYC) requirements, the charges allege.

This evasion of legal duties was alleged to have continued until the company was confronted with a federal criminal investigation, after which it implemented a KYC process in July 2023—albeit one that applied only to new customers, leaving a vast number of existing users, including those in the U.S., unverified, according to the indictment.

Last December, KuCoin reached a $22 million settlement over charges of operating an unregistered exchange from New York Attorney General Letitia James. Notably, that case referred to ether as a security, which has recently been disclosed as a new area of focus for the Securities and Exchange Commission (SEC).

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