Syed Rahman assesses the case
The operator of one of the world’s largest cryptocurrency exchanges will pay a total of $504 million for failing to meet its legal requirements.
Seychelles-based Aux Cayes Fintech, the parent company of crypto exchange OKX, admitted allowing US customers to conduct trades on its platforms with a total value of more than one trillion dollars without the legally-required safeguards.
The US Attorney’s Office for the Southern District of New York said that Aux Cayes Fintech had also admitted operating an unlicensed money-transmitting business in the US. The company has agreed to forfeit $420.3 million and pay a criminal fine of $84.4 million.
According to the plea agreement, prosecutors have agreed to credit $44.4 million of the criminal fine towards any civil fines that OKX pays if it settles a related investigation by the Commodity Futures Trading Commission.
OKX received credit for its cooperation with investigators and for “timely engaging in remedial measures”. Prosecutors said that since early last year OKX has hired an external compliance consultant to advise the company on policies and controls to prevent US customers from trading on the OKX platform. As part of the plea agreement, the company must continue to hire the consultant until February 2027.
Policy
Since being founded, Singapore-based OKX has had a formal policy of preventing US customers from using its exchange. But US prosecutors argued that the business had breached that policy and sought customers in the US. This led to US customers being involved in more than one trillion dollars’ worth of transactions through OKX by 2024. This was despite OKX not having registered with the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN); which would have required it to comply with US anti-money laundering laws. including the Bank Secrecy Act.
OKX’s affiliate, the US-based cryptocurrency exchange OKCoin USA, had registered with FinCEN as a money services business. But despite this, OKX allowed US retail customers to create an account, transfer funds and place crypto trades on the non-US exchange without completing know-your-customer processes. It also failed to make proper use of commercially-available software to monitor sanctions compliance and detect suspicious activity. Prosecutors also alleged that when OKX started requiring know-your-customer information, its staff would sometimes advise customers on circumventing these policies.
In a statement, OKX said that as part of its remediation effort it has built a financial crime, blockchain intelligence and investigations team of more than 150 staff, including people with law enforcement and regulatory experience who “actively cooperate with law enforcement agencies across the globe”. It added that it “takes full accountability for past shortcomings and we are dedicated to moving forward – ensuring a safe, compliant, and trusted environment’’.
Ignored
The wrongdoing in this case was serious. OKX blatantly ignored US law and the requirements to register with FinCEN as a money services business – and OKX was aware of these requirements as it served US retail and institutional customers.
Its guilty plea came at a time when the US government is making changes in relation to the crypto sector. Investigations into crypto companies such as Gemini and Robinhood have been dismissed. The persistence of the authorities in this case indicates how flagrant OKX’s actions and disregard for the law were.
While rules and regulations around the US crypto sector are set to be relaxed, there will still be consequences for financial institutions that avail themselves of US markets but violate US law. This case, therefore, is a reminder that compliance with federal laws is compulsory - not optional – and that the authorities will investigate suspicious activities and ensure that any fines issued will outweigh any short-term benefit to those companies that flouted the law.
