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KuCoin and its founders charged with money laundering offences in the US

Author: Syedur Rahman  27 March 2024
2 min read

Syed Rahman considers the problems facing the exchange.

The US Department of Justice (DOJ) has charged crypto exchange KuCoin and two of its founders with violating anti-money laundering laws.

The DOJ has brought charges under the Bank Secrecy Act. It alleges that KuCoin operated in the US and had US-based customers, lied to at least one of its investors about operating in the US and failed to both register with US government bodies and maintain an anti-money laundering (AML) programme.

In the indictment, the DOJ says that KuCoin and its founders Chun Gan and Ke Tang operated KuCoin as a money-transmitting business with over 30 million customers but did not implement a know -your-customer (KYC) or AML programme until 2023. Even at that point, it is alleged, KuCoin’s KYC programme did not apply to existing customers.

These failings led to KuCoin becoming a hub for processing illicit funds resulting from cybercrime and extortion. It has been stated that KuCoin received over $5 billion - and sent over $4 billion - of suspicious and criminal funds.

Allegations have also been made that more than $3 million was received by KuCoin from sanctioned entity Tornado Cash, the controversial crypto mixer that has reportedly been used extensively by organised criminal groups.

The US Commodity Futures Trading Commission (CFTC) has commenced parallel civil enforcement action against KuCoin for alleged violations of the Commodity Exchange Act and CFTC regulations.

 

Message

The action being taken against KuCoin is a clear sign that the US has no intention of slowing down its enforcement activity when it comes to crypto. And this is a message that should be heeded by those who provide crypto exchange or financial services internationally – not just in the US.

The US action follows the UK’s Financial Conduct Authority (FCA) listing KuCoin and over 140 others as entities that consumers should avoid, as they have failed to register with it. The references to the crypto world being the modern-day equivalent of the wild west now seem out of date. Regulators now have a firm grip on crypto-related entities - and they show every intention of tightening this grip.

In this particular case, KuCoin adopted a brazen approach to complying with any form of regulatory obligation, with huge amounts of illicit money passing through it.

Most cases will not be this clear cut. But this is still a case that illustrates the consequences of failing to meet legal obligations and the eagerness of the authorities to punish such failures. This is why firms operating in this sector have to make all possible efforts to understand the obligations imposed on them and ensure they comply with them.

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Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.

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