Key Takeaways
- Cryptocurrency exchange KuCoin and two of its founders have been charged with violations of the Bank Secrecy Act.
- The exchange is accused of skirting U.S. regulations in an effort to quickly expand its user base.
- KuCoin is said to have received more than $5 billion and sent more than $4 billion of suspicious funds.
- The lawsuit against KuCoin is similar to past charges against crypto exchanges BitMEX and Binance.
Global cryptocurrency exchange KuCoin and two of its founders have been indicted on criminal charges of operating without a license for transmitting money and failing to establish an anti-money laundering (AML) program in accordance with the Bank Secrecy Act (BSA).
KuCoin is accused by the U.S. Attorney's Office for the Southern District of New York of neglecting to verify the identities of its customers adequately or to report any suspicious activities. The BSA mandates that financial platforms implement stringent measures for identifying their customers and reporting any transactions that could suggest criminal activities.
Other international crypto exchanges, such as Binance and BitMEX, have faced similar charges in the past.
KuCoin's founders, Chun Gan and Ke Tang, are alleged to have concealed their platform's significant engagement with U.S. traders. According to U.S. authorities Tuesday, this strategy allowed KuCoin to amass more than 30 million customers and billions of dollars in daily trades because it didn't follow the legal obligations in place for financial institutions operating within or targeting the U.S. market.
Overall, KuCoin is accused of facilitating the laundering of more than $5 billion in suspicious funds via deposits and $4 billion via withdrawals.
“As [Tuesday'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," U.S. Attorney Damian Williams said in a statement. "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."
The charges also underscore an allegedly deliberate attempt by KuCoin and its founders to operate outside of the global financial regulatory structure. By actively disguising the presence of its U.S. clientele and misleading investors about the geographic distribution of its customer base, KuCoin sought exemption from the stringent AML and Know Your Customer (KYC) requirements, the charges allege.
This evasion of legal duties was alleged to have continued until the company was confronted with a federal criminal investigation, after which it implemented a KYC process in July 2023—albeit one that applied only to new customers, leaving a vast number of existing users, including those in the U.S., unverified, according to the indictment.
Last December, KuCoin reached a $22 million settlement over charges of operating an unregistered exchange from New York Attorney General Letitia James. Notably, that case referred to ether as a security, which has recently been disclosed as a new area of focus for the Securities and Exchange Commission (SEC).
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FAQs
Cryptocurrency exchange KuCoin and two of its founders have been charged with violations of the Bank Secrecy Act. The exchange is accused of skirting U.S. regulations in an effort to quickly expand its user base. KuCoin is said to have received more than $5 billion and sent more than $4 billion of suspicious funds.
Are the founders of KuCoin criminally charged? ›
U.S. prosecutors have filed criminal charges against KuCoin and two of its founders, accusing the global cryptocurrency exchange of violating U.S. anti-money-laundering laws.
Why is KuCoin banned in the US? ›
Crypto exchange KuCoin and two of its founders were charged with violating anti-money laundering laws by U.S. federal prosecutors. Homeland Security Investigations Special Agent Darren McCormack called KuCoin "an alleged multibillion-dollar criminal conspiracy."
What is the Bank Secrecy Act money transmission? ›
The Bank Secrecy Act (BSA) requires many financial institutions, including money services businesses (MSB), to keep records and file reports on certain transactions to the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN).
Can I use KuCoin in the United States? ›
Yes, you can use KuCoin from the US but only its limited version with low withdrawal amounts and other restrictions. This is due to the lack of licensing and KYC verification and limited customer support.
Who is KuCoin owned by? ›
FLASHDOT LIMITED, formerly known as “Phoenixfin Limited,” PEKEN GLOBAL LIMITED, and PHOENIXFIN PRIVATE LIMITED are three entities collectively doing business as global cryptocurrency exchange KuCoin. GAN and TANG, among others, founded KuCoin in September 2017.
What legal action is being taken against KuCoin? ›
In its continuing litigation against KuCoin, the CFTC seeks disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the CEA and CFTC regulations, as charged.
Are my funds safe on KuCoin? ›
KuCoin protects your account with multi-factor authentication, endpoint protection, and more. Keep your funds and wallets safe with multiple layers of protection, secure deposit and withdrawal processes, and top-tier wallet security controls.
How do I get my money out of KuCoin? ›
Log into your KuCoin account. From the navigation bar, select Assets → Overview → Withdraw to enter the withdrawal page. 2. From there, select the cryptocurrency you wish to withdraw from the dropdown (Example: USDT).
Does KuCoin report to USA? ›
While KuCoin does not directly report to the IRS, it is the responsibility of users to accurately report taxable transactions, such as trading, mining, and earning rewards.
Rule. The requirement that financial institutions verify and record the identity of each cash purchaser of money orders and bank, cashier's, and traveler's checks in excess of $3,000.
What is the 10000 rule for the Bank Secrecy Act? ›
The general rule is that you must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if your business receives more than $10,000 in cash from one buyer as a result of a single transaction or two or more related transactions.
What are the penalties for violating the Bank Secrecy Act? ›
For example, a person, including a bank employee, willfully violating the BSA or its implementing regulations is subject to a criminal fine of up to $250,000 or five years in prison, or both. 31 USC 5322(a).
Can US citizens withdraw from KuCoin? ›
KuCoin isn't licensed to operate in the US, so its verification process (KYC) isn't available. It only provides unlimited access to users who can be verified, which restricts US customers. For example, US users can't access deposit services and face withdrawal limits.
Is KuCoin legit? ›
Yes, KuCoin is a legitimate cryptocurrency exchange that has been operating since 2017. It has built a reputation for providing a wide range of cryptocurrencies and advanced features.
Who are the cofounders of KuCoin? ›
Chinese co-founders 'Michael' (Chun Gan) and 'Eric' (Ke Tang) used three companies to run KuCoin: Flashdot, Phoenixfin, and Peken Global.
Does KuCoin report to government? ›
Yes. In the United States, your transactions on KuCoin and other platforms are subject to income and capital gains tax. If you've earned or disposed of crypto (ex. Sold or traded away cryptocurrency) during the year, you'll have a tax liability to report to the IRS.
What is the penalty for KuCoin? ›
KuCoin had registered with FIU in March but faced a smaller penalty amount of ₹34.5 lakh. Financial Intelligence Unit (FIU) has imposed a fine of ₹18.82 crore ($2.25 million) on the crypto exchange Binance for operating in violation of anti-money laundering regulations.
Is my money safe in KuCoin? ›
KuCoin protects your account with multi-factor authentication, endpoint protection, and more. Keep your funds and wallets safe with multiple layers of protection, secure deposit and withdrawal processes, and top-tier wallet security controls.
