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US Prosecutors Charge KuCoin and Founders With Anti-Money Laundering Violations

U.S. federal prosecutors have brought charges against cryptocurrency exchange KuCoin and two of its founders, alleging violations of anti-money laundering laws.

The charges assert that KuCoin operated within the U.S. while deceiving investors about its presence in the country, failed to register with relevant U.S. government entities, and neglected to establish an anti-money laundering program.

According to the indictment unveiled by the U.S. Department of Justice (DOJ), KuCoin, along with founders Chun Gan and Ke Tang, ran the exchange as a money-transmitting business serving over 30 million customers. However, KuCoin did not implement a know-your-customer (KYC) or anti-money laundering (AML) program until 2023, and even then, the KYC measures did not apply to existing customers. Notably, neither Gan nor Tang were arrested in connection with the charges.

The indictment alleges that KuCoin failed to register with the U.S. Financial Crimes Enforcement Network (FinCEN) as a money services business. Due to the absence of KYC and AML programs, KuCoin became susceptible to misuse for money laundering, including the laundering of proceeds from illicit activities such as sanctions violations, darknet markets, and various fraudulent schemes.

The indictment further implicates KuCoin in indirectly receiving over $3.2 million worth of cryptocurrency from Tornado Cash, a sanctioned crypto mixer.

Additionally, the Commodity Futures Trading Commission (CFTC) filed a lawsuit against KuCoin, asserting that the exchange, offering both spot and futures trading services, failed to register as a futures commission merchant, swap execution facility, or designated contract market. The CFTC’s suit also accuses KuCoin of neglecting to implement a KYC program equivalent to the CFTC’s requirements.

In response to the charges, Homeland Security Investigations Special Agent in Charge Darren McCormack referred to KuCoin as “an alleged multibillion-dollar criminal conspiracy,” emphasizing its prominence as one of the largest crypto exchanges.

U.S. Attorney Damien Williams highlighted KuCoin’s efforts to conceal the substantial number of U.S. users trading on its platform, enabling it to become one of the world’s largest cryptocurrency exchanges. Williams asserted that KuCoin’s failure to implement basic anti-money laundering policies allowed it to operate clandestinely in the financial markets, facilitating illicit money laundering activities.

The indictment against KuCoin and its founders marks another major development in the regulatory landscape of the cryptocurrency industry, reminding us that we should always keep an eye out.

It’s noteworthy that KuCoin’s native token (KCS) experienced a 5% decline following the announcement, while Bitcoin’s (BTC) price saw a 1% drop amid the news.

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