KuCoin Faces Legal Charges in Alleged Multi-Billion Dollar Conspiracy

Cryptocurrency exchange KuCoin and two of its founders were charged Tuesday by the United States Department of Justice with conspiring to violate the Bank Secrecy Act by failing to operate a compliant anti-money laundering program. As a result, they allegedly enabled money laundering and terrorist activity to funnel through the platform.

u201cAs alleged, in failing to implement even basic anti-money laundering policies, the defendants allowed KuCoin to operate in the shadows of the financial markets and be used as a haven for illicit money laundering, with KuCoin receiving over $5 billion and sending over $4 billion of suspicious and criminal funds,u201d said U.S. Attorney Damian Williams in a statement.

KuCoin founders Chun Gan and Ke Tang, both Chinese citizens, were charged alongside Flashdot Limited, Peken Global Limited, and Phoenixfin Private Limited. The founders remain at large. KuCoin was also operating an unlicensed money transmitting business.

The firm is alleged to have sought business from U.S. customers for both its spot and futures exchanges. The DOJ says that KuCoin 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).

“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,u201d said HSI Acting Special Agent in Charge Darren McCormack.

Feds allege that KuCoin did not implement a know-your-customer (KYC) program until July 2023, and only for new customers. It did not request such data from existing customers, the DoJ claims. Feds further allege that KuCoin directly appealed to U.S. customers in its marketing efforts, yet also tried to conceal its knowledge of having customers in the country.

The news of the Department of Justice’s charges against KuCoin and its founders had a strong impact in the exchange’s native crypto ecosystem, causing the value of KuCoin Shares (KCS) to plummet.

Within hours of the announcement, KCS experienced a flash crash of over 12%, dropping from $14.40 to $12.55. This marks the worst day for KCS since December 2023, and puts the coin’s support at the exponential moving average of the last 55 days (EMA55) to the test. So far, the EMA55 appears to be holding strong, but the long-term impact of the charges on the exchange and its native token remains to be seen.