Kucoin Exchange, execs charged by DoJ, HSI, authority cites ‘multibillion-dollar criminal conspiracy’

• DoJ and HSI levies charges against Kucoin Exchange for Bank Secrecy Act violation.
• Two platform executives are part of the charges, which resemble what DoJ levied against Binance.
• Reportedly, Kucoin indirectly received a total of more than $3.2 million worth of cryptocurrency from Tornado Cash.

After settling its case against Binance Exchange, the US Department of Justice (DoJ) is going after KuCoin Exchange and its executives for violating Bank Secrecy Act and unlicensed money transmission offenses.

Also Read: Binance capitulation to DoJ harmed its case against the US SEC

KuCoin and execs criminally charged

In an official address from the US DoJ, the government authority indicates, “Prominent global cryptocurrency exchange KuCoin and two of its founders criminally charged with bank secrecy act and unlicensed money transmission offenses.”

The US Attorney for the Southern District of New York, Damian Williams, and the Acting Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”), Darren McCormack, announced the unsealing of an indictment on Tuesday.

Based on the report, the KuCoin founders, Chun Gan (Michael) and Ke Tang (Eric), Chinese citizens helped violate US Anti-Money Laundering Laws in their efforts to grow KuCoin into one of world’s largest cryptocurrency exchanges, servicing over 30 million customers.

Gan, Tang, and KuCoin were aware of their U.S. AML obligations but willfully chose to flout those requirements.

The founders, who remain at large, are charged for consciously:  

• Failing to maintain an adequate anti-money laundering (“AML”) program tailored to prevent KuCoin from being used for money laundering and terrorist financing.
• Failing to maintain reasonable procedures for verifying the identity of customers.
• Failing to file any suspicious activity reports.
• Failing to register with the CFTC as a futures commission merchant.
• Not registering with FinCEN as a money-transmitting business up to at least the end of 2023.
• Attempting to conceal the existence of KuCoin’s US customers in order to make it appear as if KuCoin was exempt from US AML and KYC requirements. 

The report details failure to implement an adequate Know-Your-Customer (KYC) program, such that until at least July 2023, customers were not required to provide any identifying information. This changed around the same month when the platform was notified of a federal criminal investigation into its activities. Nevertheless, this adjustment was only applicable to new customers while keeping existing customers out of the KYC requirement.

KuCoin Exchange’s no-KYC policy was integral to its growth and success

The authorities, therefore, conclude that as a result of KuCoin’s willful failures to maintain the required AML and KYC programs, the trading platform has acted as a vehicle to launder large sums of criminal proceeds.

The charge cites proceeds from darknet markets and malware, ransomware and fraud schemes.  In its seven years of operation (since its 2017 inception), the platform has received over $5 billion and sent over $4 billion, of suspicious and criminal proceeds, with the majority of its customer base flocking to its anonymity of the services feature. 

The two Chinese, Gan, 34, and Tang, 39, are charged with one count of conspiring to violate the Bank Secrecy Act and one count of conspiring to operate an unlicensed money-transmitting business. Each of these charges carries a maximum sentence of five years in prison.  Notably, however, the charges contained in the Indictment are merely accusations for now. 

KuCoin Token (KCS) has dropped 12% in the aftermath of this news to trade for $12.685 at the time of writing. 

KCS/USDT 1-day chart

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