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KuCoin has partnered with the multinational law firm A&O Shearman to handle ongoing lawsuits from the U.S. Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC). The company has also engaged in multiple communication rounds with the agencies.
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CEO Johnny Lyu has expressed optimism about the outcome of these meetings. According to blockchain reporter Colin Wu, Lyu has said that KuCoin is making huge efforts to improve its operations, focusing on security and compliance.
CFTC Accuses KuCoin of Illegal Commodity Transactions
In March, the CFTC filed a lawsuit against KuCoin. The lawsuit accused the exchange of illegally dealing in off-exchange commodity futures transactions and leveraged, margined, or financed retail commodity transactions. The CFTC also stated that KuCoin solicited and accepted orders for these transactions without proper registration.
The suit further detailed that KuCoin allowed investors to trade commodities, including Bitcoin, Ethereum, and Litecoin. This brought the exchange under the CFTC’s jurisdiction and required it to comply with all applicable regulations.
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The CFTC seeks disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations. Following the CFTC’s complaint, the DOJ also filed a lawsuit against the exchange and two of its co-founders. The DOJ’s lawsuit alleges that the defendants violated the Bank Secrecy Act.
DOJ Claims KuCoin Did Not Enforce AML Policies
The DOJ further alleged that KuCoin did not enforce any anti-money laundering (AML) policies, resulting in the transmission of over $4 billion in suspicious and criminal funds. The exchange also allegedly received $5 billion from operating “in the shadows of the financial markets.”
The DOJ claims that the exchange failed to implement adequate know-your-customer (KYC) procedures from July 2019 to June 2023. Interestingly, in 2018, KuCoin announced that it was implementing a new KYC system. However, the notice stated:
The KYC is not compulsory, which means if client chooses not to complete his/her KYC, the client could always trade without any restrictions.
New York prosecutors said in the complaint, “KuCoin’s no-KYC policy was integral to its growth and success.” Lyu has emphasized the company’s dedication to working with regulators and policymakers. He remains optimistic about reaching a satisfactory solution for all stakeholders involved with the help of A&O Shearman.
Cryptopolitan reporting by Jai Hamid