Crypto exchanges ‘cannot have it both ways’ - US charges filed against KuCoin
Credit: Mahambah, Shutterstock

KuCoin has become the latest global cryptocurrency exchange to find itself in troubled waters. The company has found itself the subject of a US government indictment for violations of the Bank Secrecy Act (BSA).

Homeland Security Investigations (HSI) and the Southern District of New York have filed a joint indictment against the company for allegedly operating an unlicensed money transmitting business and breaching the BSA by failing to meet AML requirements.

Chun Gan and Ke Tang, KuCoin founders who also go by the names of Michael and Eric, have also been charged but are still at large. The company is accused of failing to verify customer identity and to file suspicious activity reports, as required by the BSA.

US Attorney, Damian Williams, said: “As today’s Indictment alleges, KuCoin and its founders deliberately sought to conceal the fact that substantial numbers of US users were trading on KuCoin’s platform. 

“Indeed, KuCoin allegedly took advantage of its sizable US 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 US law to help identify and drive out crime and corrupt financing schemes. KuCoin allegedly deliberately chose not to do so.”

KuCoin was launched in 2017 and has since become one of the world’s biggest crypto platforms with a user base of 30 million and daily trading volume in the billions of dollars.

Today’s indictment claims that the firm is the fourth largest cryptocurrency derivatives exchange and fifth largest cryptocurrency spot exchange.

The exchange is based in Mahé, the largest island of the Seychelles, and has been operating in the US via its spot trading platform and its futures trading platform, the latter being launched in July 2019.

Despite this, it has never been licenced as a money transmitting business with FinCEN according to the indictment. The firm has also been subject to previous investigations, having only adopted KYC measures in 2023 following a probe into its lack of ID protocols.

Lastly, the company is also accused of attempting to conceal the fact that it had users in the US in order to circumvent KYC, AML and counter terrorist financing (CTF) requirements. 

HSI Acting Special Agent in Charge, Darren McCormack, added: “Today, we exposed one of the largest global cryptocurrency exchanges for what our investigation has found it to truly be: an alleged multibillion-dollar criminal conspiracy.

“KuCoin grew to service over 30 million customers, despite its alleged failure to follow laws necessary to ensuring the security and stability of our world’s digital banking infrastructure.

“The defendants’ alleged pattern of skirting these vitally important laws has finally come to an end. I commend HSI New York’s El Dorado Task Force and our law enforcement partners for their commitment to the mission.”

The announcement marks a return of negative news to the cryptocurrency sector after a period of renewed valuation, itself coming in the aftermath of a number of scandals and legal dramas.

Bitcoin reached a new height of over $70,000 in valuation recently, its strongest performance since November 2021. This does not mean that controversy has faded, however, as Binance – still the world’s biggest cryptocurrency exchange in terms of daily trading volume – continues to face legal difficulties, for one example.

Williams concluded by accusing KuCoin of offering ‘in the shadows of the financial markets’ and of being used for money laundering, having received over $5bn and sending over $4bn in suspicious funds.

“Crypto exchanges like KuCoin cannot have it both ways,” he said. “Today’s indictment should send a clear message to other crypto exchanges: if you plan to serve US customers, you must follow US law, plain and simple.”