KuCoin Pleads Guilty to AML Violations, Pays $300M Settlement

One of the world‘s largest cryptocurre`ncy exchanges, KuCoin has pleaded guilty to operating an unlicensed money-transmitting business and agreed to pay over $300 million in penalties. The announcement, made by U.S. Attorney Danielle Sassoon, sheds light on KuCoin’s failure to implement critical anti-money laundering (AML) and know-your-customer (KYC) measures, which are essential for preventing illegal financial activities.

The Seychelles-based company behind KuCoin, PEKEN GLOBAL LIMITED, admitted to violating U.S. laws by neglecting to register with the Financial Crimes Enforcement Network (FinCEN) and failing to report suspicious transactions. As part of the settlement, KuCoin will withdraw from the U.S. market for at least two years, and its founders, Chun Gan (also known as “Michael”) and Ke Tang (also known as “Eric”), will step away from the platforms operations entirely.

U.S. Attorney Danielle R. Sassoon didn‘t mince words when addressing KuCoin’s misconduct. “For years, KuCoin avoided implementing required anti-money laundering policies designed to identify criminal actors and prevent illicit transactions,” she said. “As a result, KuCoin was used to facilitate billions of dollars worth of suspicious transactions and to transmit potentially criminal proceeds, including proceeds from darknet markets and malware, ransomware, and fraud schemes.”

Since its launch in 2017, KuCoin has grown into a major player in the crypto world, amassing over 30 million customers and handling billions of dollars in daily trading volume. Despite its significant presence in the U.S., where it served approximately 1.5 million registered users and raked in $184.5 million in fees, the exchange consistently failed to comply with U.S. regulations.

KuCoin‘s platform allows users to trade popular cryptocurrencies like Bitcoin and Ethereum, as well as derivative products tied to their value. However, as a money-transmitting business, KuCoin was legally required to register with FinCEN and maintain robust AML and KYC programs. These programs are designed to prevent money laundering and ensure that financial institutions don’t become havens for criminal activity.

Despite these obligations, KuCoin dragged its feet on implementing a mandatory KYC program until August 2023. Even then, the program excluded existing customers who only wanted to withdraw funds or close positions. Before this change, KuCoin employees openly stated on social media that KYC wasnt mandatory, even for U.S.-based customers. The exchange also failed to file suspicious activity reports or register with FinCEN, allowing billions of dollars in questionable transactions to flow through its platform unchecked.

As part of the settlement, PEKEN agreed to forfeit 184.5 million and pay a criminal fine of approximately 184.5 million and a criminal fine of approximately 112.9 million. Additionally, KuCoins founders, Gan and Tang, agreed to forfeit $2.7 million each. The U.S. Department of Justice also agreed to defer prosecution against Gan and Tang for two years.

The investigation into KuCoin was led by the El Dorado Task Force in the New York Field Office of Homeland Security Investigations, with support from HSI Pretoria in South Africa. The case is being handled by the Offices Illicit Finance & Money Laundering Unit, with Assistant U.S. Attorneys Emily Deininger and David R. Felton at the helm of the prosecution.

This case marks a turning point in the U.S. governments efforts to regulate the cryptocurrency industry and hold platforms accountable for enabling illegal activities. It also sends a clear message to other crypto exchanges operating in the U.S.: comply with federal laws or face severe consequences.

KuCoins guilty plea and the substantial settlement underscore the growing scrutiny of the cryptocurrency sector. As the industry continues to evolve, this case highlights the importance of transparency, accountability, and adherence to regulations to prevent misuse and protect consumers.

The fallout from KuCoins actions serves as a stark reminder that no company, no matter how large or influential, is above the law. For the crypto industry, this could be a pivotal moment in shaping a more secure and regulated future.