The United States has charged cryptocurrency exchange KuCoin and its founders, Chnu Gan and Ke Tang, with violating money laundering laws. Federal prosecutors allege that they conspired to operate an unlicensed money transmitting business and to violate the Bank Secrecy Act by not maintaining an adequate anti-money laundering (AML) program.
Founded in 2017, KuCoin is one of the largest crypto exchanges globally, boasting over 30 million customers and daily trading volumes in the billions. Despite actively soliciting business from U.S. customers and understanding their AML obligations, Gan, Tang, and KuCoin “willfully chose to flout” these requirements, according to an unsealed indictment.
Prior to July 2023, KuCoin did not require customers to provide identifying information, implementing a Know Your Customer (KYC) program only after being informed of a federal criminal investigation into its operations. Even then, the KYC program was limited to new customers.
Additionally, KuCoin failed to file necessary suspicious activity reports, did not register with the Commodity Futures Trading Commission (CFTC) as a futures commission merchant, and did not register with the Financial Crimes Enforcement Network (FinCEN) as a money transmitting business through at least the end of 2023.
According to the indictment, Gan, Tang, and KuCoin “affirmatively attempted to conceal the existence of KuCoin’s U.S. customers” to make it appear that the exchange was excluded from U.S. AML and KYC requirements. Authorities state that as a result of these failures, KuCoin became a conduit for laundering substantial sums of criminal proceeds, including funds from darknet markets, malware, ransomware, and fraudulent schemes.
U.S. Attorney Damian Williams stated: “As alleged, by not implementing even basic anti-money laundering policies, the defendants allowed KuCoin to operate in the shadows of the financial markets and serve as a haven for illicit money laundering, with KuCoin receiving over $5 billion and sending over $4 billion of suspicious and criminal funds.” Concurrently, the CFTC has initiated its own civil enforcement action against KuCoin for operating an illegal digital asset derivatives exchange.