In fact, GAN, TANG, and KuCoin actively attempted to hide the presence of KuCoin’s U.S. customers in order to make KuCoin appear exempt from U.S. AML and KYC requirements. Although KuCoin collects and tracks customers’ location information, KuCoin actively prevents its U.S. customers from identifying themselves when opening KuCoin accounts. And, KuCoin lied to at least one investor in 2022 about the location of its customers, falsely stating that it had no U.S. customers, when in fact, KuCoin had a large U.S. customer base. In fact, in multiple social media posts, KuCoin actively promotes itself to U.S. customers as an exchange where they can trade without KYC. For example, KuCoin stated in a Twitter message in April 2022, “KYC is not supported for US users, however, KYC is not mandatory on KuCoin. Usual transactions can be completed using unverified accounts -"
Due to KuCoin's deliberate failure to maintain required AML and KYC procedures, KuCoin was used as a vehicle to launder large amounts of criminal proceeds, including proceeds from darknet markets and malware, ransomware, and fraud schemes. Since its inception in 2017, KuCoin has received over $5 billion and sent over $4 billion in suspicious and criminal proceeds. Many KuCoin customers use its trading platform specifically because of the anonymity service it provides. In other words, KuCoin’s no-KYC policy is critical to its growth and success.
GAN, 34, and TANG, 39, both Chinese nationals, are each charged with one count of conspiracy to violate the Bank Secrecy Act and one count of conspiracy to operate an unlicensed money transmission business. Each count carries a maximum penalty of Five years in prison.
FLASHDOT LIMITED, an entity registered in the Cayman Islands; PEKEN GLOBAL LIMITED, an entity registered in the Republic of Seychelles; and PHOENIXFIN PRIVATE LIMITED, an entity registered in Singapore, jointly operating under the name "KuCoin", each was charged with one count of conspiracy to violate Bank Secrecy Act count, punishable by up to five years in prison; Conspiracy to operate an unauthorized funds transmission business, punishable by up to five years in prison; Bank Secrecy Act violation count, punishable by up to 10 years imprisonment; and one count of operating an unlicensed money transmitting business, which carries a maximum penalty of five years in prison.
The maximum potential penalty in this case was set by Congress and is for informational purposes only, as the defendant's final sentence will be determined by a judge.
Mr. Williams commended Homeland Security Investigations’ New York-based El Dorado Task Force for its outstanding investigative work. Mr. Williams further thanked the Commodity Futures Trading Commission, which today filed a parallel civil lawsuit against KuCoin.
The matter is being handled by the office's Illicit Finance and Money Laundering Unit. Assistant U.S. Attorneys Emily Deininger and David R. Felton prosecuted this case.
The charges in the indictment are accusations only, and the defendants are presumed innocent until proven guilty.
KuCoin responded:
KuCoin works great and our users’ assets are absolutely safe. We are aware of the reports and are currently investigating the details through our lawyers. KuCoin respects the laws and regulations of various countries and strictly abides by compliance standards.
The Commodity Futures Trading Commission (CFTC) announced today that it has filed a civil enforcement action in the U.S. District Court for the Southern District of New York, accusing Mek Global Limited, PhoenixFin PTE Ltd., Flashdot Limited and Peken Global Limited of jointly operating a centralized digital asset under the name KuCoin. exchange, violated multiple provisions of the Commodity Exchange Act (CEA) and the CFTC.
The complaint accuses KuCoin of illegally engaging in over-the-counter commodity futures trading, leverage, margin, or providing financing for retail commodity transactions; without registering as a futures commission merchant (FCM), it solicited and accepted commodity futures, swaps, leverage, margin, or retail commodity futures from the CFTC. orders to finance commodity transactions; failed to carefully monitor its FCM activities; operated a facility that traded or processed swaps without being registered as a Swap Execution Facility (SEF) or a Designated Contract Market (DCM); and failed to implement effective customer Identification Program (CIP).
In its ongoing lawsuit against KuCoin, the CFTC seeks disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction prohibiting further violations of CEA and CFTC regulations.
Enforcement Director Ian McGinley said: “For too long, some overseas cryptocurrency exchanges have followed a now-familiar playbook by offering derivative products and falsely claiming that Americans cannot use their platforms, when in fact, any use U.S. persons using common techniques were able to transact without providing basic customer identifying information."
McGinley continued: “As the CFTC’s action today and its previous enforcement actions make clear, the CFTC’s playbook should also be familiar by now – the CFTC will charge these entities with failing to register with the CFTC and comply with the requirements of Protecting U.S. Customers, Prevention and Detection Agency Rules for Terrorist Financing and Money Laundering.”
Case background
According to the complaint, from 2019 to approximately 2023, KuCoin offered and executed commodity derivatives and leveraged, margined or financed commodity transactions to U.S. users without implementing required KYC compliance procedures. The complaint further alleges that although KuCoin claimed to have implemented KYC procedures, these procedures were in fact false and did not prevent U.S. customers from trading commodity interests and derivatives on the platform.
