KuCoin Under Fire for Violations of Bank Secrecy Act

KuCoin, one of the world’s largest digital asset exchanges, is the latest to find itself under fire from U.S. based authorities, having allegedly violated the Bank Secrecy Act, and more.   Unsurprisingly, the exchange’s native token ‘KCS‘ has faltered since the news broke, dropping 14% on the day at time of writing.

The Charges

The announcements made today involved not only the exchange but also two of its Founders, Chun Gan and Ke Tang. The DOJ is indicting each on various charges stemming from the following and more.

• Willful failure of AML compliance measures
• Willful neglect of suspicious activity reports
• Lack of required licensing to operate as a money-transmitting business

As it stands, the indictment indicates that the founders are still at large.

In addition, the CFTC simultaneously announced charges of its own, stating that KuCoin operated from 2019-2023 in the United States as an ‘illegal digital asset derivatives exhange’, in addition to willful failure to implement a sufficient KYC program.

Commentary

Upon announcing the charges, representatives from each government entity took the time to comment.

CFTC Director of Enforcement, Ian McGinley, stated,

“For too long, some offshore crypto exchanges have followed a now-familiar playbook by offering derivative products and falsely claiming people in the United States cannot use their platforms, when in reality, anyone in the U.S. with commonly used technology can trade without providing basic customer identifying information…As made clear by the CFTC’s action today and its previous enforcement actions, the CFTC’s playbook should also now be familiar – the CFTC will charge such entityies with failing to register with the CFTC and failing to comply with the agency’s rules that protect U.S. customers and prevent and detect terrorist financing and money laundering,”

Meanwhile, U.S. Attorney Damian Williams stated,

“As today’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.  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.  But financial institutions like KuCoin that take advantage of the unique opportunities available in the United States must also comply with U.S. law to help identify and drive out crime and corrupt financing schemes.  KuCoin allegedly deliberately chose not to do so.”

Joining its Peers

As mentioned, KuCoin is just the latest centralized exchange to find itself under fire from U.S. authorities.  Over the past years, the following industry giants have each found themselves in such unenviable situations.

While the charges levied on each exchange vary, it is clear that if such entities expect to continue doing business in the United States, something needs to change.  Whether that be amended regulations, or paring back services offered, only time will tell.