Recently, the crypto exchange KuCoin and two of its founders, Chun Gan and Ke Tang, have been criminally charged by the US Department of Justice for operating as an illegal exchange in the USA. This comes after allegations of failing to implement anti-money laundering protocols. The charges include violations of the Bank Secrecy Act and operating as an unlicensed money transmitter business.
The Department of Justice claimed that KuCoin did not implement any know-your-customer (KYC) or anti-money laundering controls until 2023. Even when these controls were eventually put in place, they did not apply to existing customers. This lack of oversight allowed more than $9 billion in suspicious transactions to take place, leading to the charges against KuCoin and its founders.
In addition to the charges by the Department of Justice, the Commodity Futures and Trade Commission (CFTC) also charged KuCoin with multiple violations of the Commodity Exchange Act. The CFTC is seeking to impose fines and trading bans, while the DoJ is pursuing forfeiture and criminal penalties. The US Attorney Damien Williams highlighted that KuCoin was used by “substantial numbers of U.S. users” and failed to implement basic anti-money laundering policies, allowing the exchange to be used for illicit money laundering activities.
The legal troubles facing KuCoin and its founders come at a time when the crypto market is already facing increased scrutiny from regulators. This follows similar charges against another major exchange, Binance, in recent months. The CFTC’s lawsuit against KuCoin also raises questions about regulatory authority over cryptocurrencies like Ether.
The recent news that the SEC is considering classifying Ether as a security briefly impacted the price of ETH, causing it to dip to just above $3,000. However, the price has since recovered to above $3,500, supported by a broader crypto market rally that has seen Bitcoin reclaim $70,000. Additionally, BlackRock’s entry into the world of asset tokenization with the launch of its first tokenized money market fund on Ethereum has also contributed to Ether’s price recovery.
The legal troubles facing KuCoin and its founders have had ripple effects throughout the crypto market. The charges underscore the importance of implementing robust anti-money laundering protocols and regulatory compliance in the crypto industry. As regulatory scrutiny continues to increase, market participants must stay vigilant and adhere to compliance standards to avoid similar legal pitfalls.
