KuCoin and its founders potentially face a maximum sentence of 10 years in prison for breaching U.S. laws on anti-money laundering.
KuCoin, one of the largest cryptocurrency trading platforms globally, and its founders Chun Gan (known as “Michael”) and Ke Tang (known as “Eric”), have been charged by US regulators. The charges stem from allegations that they operated without the necessary licenses and failed to comply with the Bank Secrecy Act, specifically regarding anti-money laundering measures. They could potentially face 5-10 years in prison.
KuCoin Accused of Deliberately Evading US Laws
KuCoin, led by Gan and Tang, is accused of intentionally disregarding US laws aimed at combating money laundering and terrorist financing. Since its establishment in 2017, KuCoin aimed to attract US customers and become one of the top cryptocurrency exchanges globally, with daily trading volumes reaching billions and annual volumes reaching trillions. However, it is alleged that this significant growth was achieved by disregarding important US regulations against money laundering.
US Attorney Damian Williams noted that KuCoin and its founders deliberately made it difficult to identify US users trading on their platform. This lack of transparency and failure to comply with basic anti-money laundering rules allowed KuCoin to operate in a manner that was not entirely legal, potentially facilitating the movement of illicit funds. It is claimed that the exchange handled over $9 billion in suspicious funds or funds derived from criminal activities.
The press release stated, “Today’s indictment should serve as a clear message to other cryptocurrency exchanges: if you plan to serve US customers, you must comply with US law, plain and simple.”
According to officials, KuCoin was obligated to adhere to regulations aimed at preventing money laundering, which included registering with US financial authorities like the Financial Crimes Enforcement Network (FinCEN) and the Commodity and Futures Trading Commission (CFTC). These regulations are in place to ensure that businesses such as KuCoin verify the identity of their customers to prevent illegal activities such as money laundering.
Despite these clear requirements, KuCoin’s founders, Chun Gan and Ke Tang, along with the company itself, are accused of evading these legal obligations. It was only in July 2023, when KuCoin became aware of a federal criminal investigation, that the company began requesting identification from new customers.
However, this action was too little, too late, as it failed to address the identification of millions of existing customers, including a significant number in the US. The company also neglected to report suspicious activities, a crucial requirement under US law.
KuCoin Covertly Served US Customers
KuCoin also made efforts to conceal the fact that it served US customers. Despite collecting data that could reveal customer locations, KuCoin made it challenging for US customers to disclose their nationality during the registration process. Moreover, the company falsely informed investors that it had no US customers, contradicting the reality of its substantial user base in the country. KuCoin even promoted itself on social media as a platform where US users could trade anonymously, circumventing the need for identity verification.
Chun Gan and Ke Tang, both from China, face charges related to violating the Bank Secrecy Act and operating an unlicensed money transmitting business, with potential sentences of up to five years for each count. KuCoin, which is operated by entities registered in the Cayman Islands, Seychelles, and Singapore, is similarly accused and could face charges that carry a maximum sentence of 10 years in prison for violating the Bank Secrecy Act and other offenses, each with significant potential penalties.
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Crypto Regulations
Cryptocurrency