Scandal for the crypto exchange KuCoin: accusations of violating anti-money laundering laws

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News: the cryptocurrency exchange KuCoin has been accused of violating anti-money laundering laws according to US authorities. It has also been charged under banking secrecy regulations. 

Let’s see below all the details. 

KuCoin exchange and the banking secrecy law

As anticipated, the federal prosecutors of the United States have accused KuCoin, a cryptocurrency exchange, along with two of its founders, of violating anti-money laundering laws.

According to the accusations, the exchange operated in the United States without registration, deceived investors about its operations in the United States, and failed to implement an anti-money laundering program in compliance with government regulations.

The United States Department of Justice has stated that KuCoin, operated by founders Chun Gan and Ke Tang, has operated as a money transfer platform for over 30 million customers.

This without having an adequate customer identification program (KYC) or anti-money laundering (AML) until 2023.

Even when it was introduced, the KYC program did not apply to existing customers. However, Gan and Tang were not arrested, according to the Department of Justice.

The indictment also highlighted that KuCoin has not registered with the Financial Crimes Enforcement Network of the United States as a financial services company. 

Due to the lack of KYC and AML measures, KuCoin has been used to launder proceeds from suspicious and criminal activities. Among these violations are sanctions breaches, darknet markets, and schemes involving malware, ransomware, and fraud.

The charges mentioned the transfer of over 3.2 million dollars in cryptocurrencies from Tornado Cash, a sanctioned cryptocurrency mixer, to KuCoin. 

Furthermore, the Commodity Futures Trading Commission has filed a lawsuit against KuCoin. Specifically alleging that the exchange did not properly register as a futures commission merchant.

Furthermore, it seems that it has not implemented a KYC program equivalent to CFTC regulations.

The accusation of the United States: the case exposes suspicious operations

The CFTC is seeking monetary sanctions, trading bans, and registration prohibitions, as well as an injunction. Meanwhile, the Department of Justice is seeking confiscation along with criminal penalties. 

The special agent in charge of national security investigations, Darren McCormack, has described KuCoin as “an alleged multibillion-dollar criminal conspiracy.” He also highlighted its importance as one of the largest cryptocurrency exchanges.

The United States Attorney Damien Williams has revealed that KuCoin actively concealed the fact that a large number of US users were trading on its platform. 

KuCoin, states Williams, has leveraged its large customer base in the United States to emerge as one of the top derivatives and spot exchanges in the world of cryptocurrencies. This with billions of dollars in daily transactions and trillions of dollars in annual volume.

Failing to even implement basic anti-money laundering policies, KuCoin’s managers have allowed the exchange to operate in the shadows of financial markets. Thus serving as a hiding place for money laundering of illicit funds.

It is estimated that KuCoin has received over 5 billion dollars and sent over 4 billion dollars of suspicious and criminal funds.

The announcement caused a 5% decrease in the native token of KuCoin (KCS), while the price of Bitcoin (BTC) dropped by 1%. However, it maintains high volatility with a value hovering around $70,000.

These actions come shortly after the Department of Justice, the CFTC, and the Department of the Treasury resolved similar charges against Binance, the world’s largest cryptocurrency exchange by trading volume.