It has recently come to light that major crypto exchange KuCoin, along with two of its founders, has been accused of failing to implement anti-money laundering (AML) and know-your-customer (KYC) procedures. According to United States prosecutors, the absence of these crucial procedures on KuCoin enabled the platform to be used for money laundering activities involving illicit funds from criminal proceeds. The prosecutors further alleged that KuCoin, along with Chun Gan and Ke Tang – founders of the exchange, were operating an unlicensed money-transmitting business and were in violation of the Bank Secrecy Act.
One of the main points of contention raised by the prosecutors is that KuCoin and its founders served customers in the US without registering with the Financial Crimes Enforcement Network (FinCEN) as a money-transmitting firm and the Commodity Futures Trading Commission (CFTC) while also operating as a futures commission merchant. Moreover, the defendants were accused of willfully refusing to adhere to AML regulations and implement the KYC program on the platform. It was even alleged that KuCoin had attempted to conceal its US customers, going as far as falsely claiming not to have any users from the United States at one point.
The press release detailing the allegations stated that KuCoin’s sizable US customer base played a significant role in its rise to becoming one of the world’s biggest crypto exchanges. The absence of KYC procedures on KuCoin made it an attractive option for customers seeking anonymity, with the platform’s no KYC policy being touted as integral to its growth and success. The controversy surrounding KuCoin has caused a significant stir in the crypto community, leading to net outflows from the exchange amounting to nearly $800 million within just 12 hours of the news breaking. Additionally, KuCoin’s native token (KCS) saw a sharp decline of approximately 13% in response to the allegations.
The charges brought against Gan and Tang, co-founders of KuCoin, carry a maximum prison sentence of five years each. However, it has been reported that the two individuals are currently at large. This recent scandal involving KuCoin is not the only legal issue the exchange has faced, as it previously paid a $22 million fine as part of a settlement deal with the New York Attorney General (NYAG) and subsequently exited the New York market. The case of KuCoin is reminiscent of similar charges brought against Binance, another major cryptocurrency exchange, in the United States. Binance entered a guilty plea and agreed to a $4.3 billion settlement with the Department of Justice.
The allegations surrounding KuCoin’s failure to implement essential AML and KYC procedures have had far-reaching consequences for the exchange and its founders. The lack of regulatory compliance has not only tarnished KuCoin’s reputation but has also led to significant financial losses and legal repercussions. It serves as a stark reminder of the importance of adhering to AML and KYC regulations in the cryptocurrency industry to prevent illicit activities and ensure a safe and transparent trading environment for all stakeholders.
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