The U.S. Department of Justice has charged cryptocurrency exchange KuCoin and its two founders with violations of the Bank Secrecy Act. The duo allegedly operated without adequate anti-money laundering safeguards, thereby allegedly permitting money laundering and terrorist activity to take place through their platform.
As U.S. Attorney Damian Williams alleges, the lack of essential anti-money laundering policies allowed KuCoin to operate outside of legally regulated financial markets, making it a potential haven for illegal money laundering activities. Over $5 billion in funds of dubious legality reportedly passed through KuCoin with over $4 billion being dispensed. Founders Chun Gan and Ke Tang, both Chinese nationals, are among those charged. However, they remain at large.
According to the Department of Justice, KuCoin solicited business from U.S. clients for its spot and futures exchanges but failed to register as a money transmitting business with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), and as a futures commission merchant with the U.S. Commodity and Futures Trading Commission (CFTC). These allegations culminated in HSI Acting Special Agent in Charge Darren McCormack’s assertion that KuCoin is in fact a “multibillion-dollar criminal conspiracy”.
The Department of Justice alleges that KuCoin did not implement a know-your-customer (KYC) program until mid-2023, and even then, it was only for new customers. Existing customers were not asked for such information. Furthermore, it is claimed that KuCoin tried to hide the fact that it had customers in the U.S., despite actively marketing to them.
As the news broke, the value of KuCoin’s native token, KCS, suffered significantly, experiencing a 12% flash crash from $14.40 to $12.55. This was the worst dip for the KCS since late 2023, and puts the coin to a robust test at the 55-day exponential moving average. The long-term impact of these charges will undoubtedly shape not only KuCoin but also its native token.