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Major crypto exchange KuCoin, along with two of its founders, was alleged to have failed to implement anti-money laundering (AML) and know-your-customer (KYC) procedures.
According to prosecutors, the absence of AML and KYC on KuCoin enabled the platform to be used to launder illicit funds from criminal proceeds.
KuCoin and Founders Slammed With Charges
In a press release on March 26, United States prosecutors accused KuCoin, with Chun Gan and Ke Tang – founders of the exchange, of operating an unlicensed money-transmitting business and also contravening the Bank Secrecy Act.
The prosecutors allege that KuCoin and its founders served customers in the US but failed to register with the Financial Crimes Enforcement Network (FinCEN) as a money-transmitting firm and the Commodity Futures Trading Commission (CFTC) while operating as a futures commission merchant.
Also, the defendants “willfully” refused to adhere to AML regulations nor implement the KYC program on the platform. Instead, they tried to conceal US customers on the platform, with prosecutors stating that KuCoin reportedly, at one time, falsely claimed not to have any users from the United States.
U.S. Attorney Damian Williams claimed that KuCoin used its “sizable US customer base” to catapult itself to one of the world’s biggest crypto exchanges.
Consequently, the absence of KYC on KuCoin served as an attraction for customers who desired anonymity, with the no KYC policy supposedly being “integral to its growth and success,” as stated in the press release.
Darren McCormack, HSI Acting Agent in Charge, said in a statement that KuCoin, Gan, and Tang were allegedly involved in an “alleged multi-billion dollar criminal conspiracy.”
“As a result of KuCoin’s willful failures to maintain the required AML and KYC programs, KuCoin has been used as a vehicle to launder large sums of criminal proceeds, including proceeds from darknet markets and malware, ransomware, and fraud schemes. Since its founding in 2017, KuCoin has received over $5 billion, and sent over $4 billion, of suspicious and criminal proceeds.”
Data from Nansen shows that the total net outflows from the exchange within the first 12 hours of the news going out were close to $800 million. Additionally, KuCoin’s native token (KCS) plunged by about 13%.
US Government Going After More Major Crypto Exchanges
The two charges levied against Gan and Tang each carry a maximum prison sentence of five years. Meanwhile, the KuCoin founders are said to be at large at the time of the indictment.
As previously reported by CryptoPotato, KuCoin paid a $22 million fine as part of a settlement deal with the New York Attorney General (NYAG). The crypto exchange also exited the New York market.
Binance, another major cryptocurrency exchange, was slammed with similar charges in the United States. The company entered a guilty plea and a $4.3 billion settlement with the Department of Justice.