March 27, 2024

US DOJ Files Lawsuit Against KuCoin and Founders for Bank Secrecy Act Violations

The US Department of Justice has taken legal action against KuCoin and its founders, accusing them of breaching the Bank Secrecy Act.

In a significant legal move, the United States Department of Justice has filed charges against cryptocurrency exchange KuCoin and two of its founders for allegedly conspiring to violate the Bank Secrecy Act. The charges stem from accusations that KuCoin failed to establish and maintain an effective anti-money laundering program, thus facilitating illicit financial activities, including money laundering and funding of terrorist operations.

According to U.S. Attorney Damian Williams, the defendants' failure to implement even basic anti-money laundering measures allowed KuCoin to operate in the shadows of the financial markets, becoming a hub for unlawful financial transactions. The allegations suggest that KuCoin handled over $5 billion in suspicious and criminal funds, underscoring the severity of the accusations.

The founders named in the lawsuit, Chun Gan and Ke Tang, both Chinese nationals, are currently at large. Alongside them, Flashdot Limited, Peken Global Limited, and Phoenixfin Private Limited are also implicated in the charges. Additionally, KuCoin is accused of running an unlicensed money transmitting business, further complicating its legal predicament.

The investigation revealed that KuCoin actively sought business from US customers for its spot and futures exchanges, despite failing to register as a money transmitting business with FinCEN and as a futures commission merchant with the CFTC. This failure to comply with regulatory requirements not only exposes KuCoin to legal jeopardy but also highlights systemic issues within the cryptocurrency exchange industry.

HSI Acting Special Agent in Charge Darren McCormack emphasized the severity of the allegations, characterizing KuCoin as part of a sprawling criminal conspiracy. The investigation alleges that KuCoin only implemented a know-your-customer (KYC) program for new customers in July 2023, neglecting to gather such information from existing customers. Furthermore, KuCoin's marketing efforts targeted US customers while simultaneously attempting to conceal its awareness of their presence, painting a troubling picture of the exchange's practices.

The legal action taken by the US Department of Justice underscores the growing regulatory scrutiny facing cryptocurrency exchanges and their obligation to adhere to anti-money laundering and counter-terrorism financing regulations. As the case against KuCoin unfolds, it may set a precedent for how authorities worldwide approach oversight of the cryptocurrency industry, potentially influencing regulatory frameworks and compliance standards across the globe.

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