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The Commodity Futures Trading Commission (CFTC) has taken legal action against KuCoin, a digital asset exchange, for allegedly violating the Commodity Exchange Act (CEA) and CFTC regulations. The lawsuit targets several companies collectively operating under the name KuCoin, accusing them of multiple violations related to commodity trading.
KuCoin Faces Legal Heat
KuCoin, a significant player in the cryptocurrency market, faces legal troubles initiated by the CFTC due to alleged violations of the Commodity Exchange Act. Accusations range from engaging in illegal commodity transactions to operating without proper registration. The charges are extensive, covering offenses such as off-exchange commodity futures transactions and failure to implement adequate KYC processes.
Exclusive: Three independent sources confirmed to WuBlockchan that KuCoin considered ceasing operations and selling the exchange in 2023. KuCoin was launched into criminal investigation by the U.S. in 2023, and has also been subject to multiple investigations in China. pic.twitter.com/7Fl4aLk6cW
— Wu Blockchain (@WuBlockchain) March 27, 2024
U.S. Attorney Damien Williams stated that KuCoin has attempted to hide many U.S. users trading on its platform. He said KuCoin became a big crypto exchange, handling billions of dollars in trades daily and trillions yearly. They allegedly allowed money laundering without basic rules, receiving over $5 billion and sending over $4 billion in suspicious funds.
However, in response to the CFTC’s claims, Kucoin denied such claims and said they are investing internally and the company has always obeyed the rules and regulations.
CFTC Seeks Penalties
In response to KuCoin’s alleged law violations, the CFTC is seeking severe penalties. These include disgorgement of profits, monetary fines, bans on trading and registration, and an injunction against further violations.
The legal fight shows how complicated it is to regulate cryptocurrencies and how important it is to follow the rules to protect investors and stop illegal activities like money laundering. The CFTC is also making it clear that it will hold crypto platforms responsible for following U.S. laws.
Parallel Criminal Charges
In another legal action, entities associated with KuCoin face criminal charges related to the Bank Secrecy Act and operating an unlicensed money transmitter business. This adds another layer of complexity to the ongoing legal scoop.
After the news, KuCoin’s native token (KCS) saw a 5% decline, signaling investor concern. Meanwhile, Bitcoin (BTC) experienced a 1% drop but remains volatile, hovering around $70,000. These events echo previous actions taken against Binance, indicating increased regulatory scrutiny across the crypto.
ETH Status in Trouble?
But the real explosive in the case is the CFTC’s declaration of Ethereum and Litecoin as commodities, alongside Bitcoin, in a lawsuit against KuCoin for illegal commodity transactions. This development is significant, especially considering the SEC’s efforts to classify Ethereum differently. SpotOnChain reports that following the US government’s criminal complaint against KuCoin, around $500 million worth of assets have been withdrawn from KuCoin on the Ethereum network. Notably, KuCoin’s hot wallets still hold over $3.6 billion worth of assets on Ethereum.