DOJ charges KuCoin founders for AML violations

Share this article

KuCoin, one of the world’s largest crypto exchanges, and two of its founders, Chun Gan and Ke Tang, have been criminally charged by U.S. prosecutors for allegedly conspiring to violate the Bank Secrecy Act and operating an unlicensed money-transmitting business.

The United States Attorney for the Southern District of New York, Damian Williams, and the Acting Special Agent in Charge of the New York Field Office of Homeland Security Investigations (HSI), Darren McCormack, announced the unsealing of an indictment against KuCoin and its founders today, March 26, 2024. According to a press statement released by the office indictment alleges that KuCoin and its founders willfully failed to maintain an adequate anti-money laundering (AML) program, verify customer identities, and file suspicious activity reports.

“[…] KuCoin and its founders deliberately sought to conceal the fact that substantial numbers of U.S. users were trading on KuCoin’s platform. Indeed, KuCoin allegedly took advantage of its sizeable U.S. 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.” Williams stated.

The prosecution also distinguished which entities they were charging against. According to the statement, KuCoin, which operates through three entities collectively known as FLASHDOT LIMITED, PEKEN GLOBAL LIMITED, and PHOENIXFIN PRIVATE LIMITED, was aware of their AML obligations to the U.S., but despite the knowledge, willfully chose to flout the requirements. Until at least July 2023, KuCoin did not require customers to provide any identifying information, and even after implementing a know-your-customer (KYC) program, it only applied to new customers and not to its existing user base.

“We are aware of the related reports and are currently investigating the details through our lawyers. KuCoin respect the laws and regulations of various countries and strictly adheres to compliance standards,” the exchange clarified in a statement on X.

Prosecutors claim that KuCoin actively prevented its U.S. customers from identifying themselves as such when opening accounts and lied to at least one investor in 2022 about not having any U.S. customers. The exchange allegedly marketed itself on social media as a platform where U.S. customers could trade without undergoing KYC procedures.

Due to KuCoin’s alleged failures to maintain proper AML and KYC programs, prosecutors say the exchange has been used to launder large sums of criminal proceeds, including funds from darknet markets, malware, ransomware, and fraud schemes. The exchange has allegedly received over $5 billion and sent over $4 billion in suspicious and criminal proceeds, with records stretching back to 2017.

Gan, 34, and Tang, 39, both citizens of China, are each charged with one count of conspiring to violate the Bank Secrecy Act and one count of conspiring to operate an unlicensed money-transmitting business. Each charge carries a maximum sentence of five years in prison. The three entities operating as KuCoin face the same charges.

Update: This article has been updated to reflect the quote from KuCoin.

Share this article