In a significant development within the cryptocurrency industry, KuCoin has pled guilty to one count of operating an unlicensed money transmitting business, resulting in a staggering penalty of $297 million, as announced by the United States Attorney’s Office for the Southern District of New York.
During the announcement, U.S. Attorney Danielle R. Sassoon highlighted the failures of KuCoin in implementing essential anti-money laundering (AML) policies. These deficiencies allowed the exchange to facilitate billions of dollars’ worth of suspicious transactions and to transmit potentially criminal proceeds from various illicit activities, including those linked to darknet markets, malware, ransomware, and fraud schemes.
As part of the terms of the guilty plea, KuCoin will exit the U.S. market for a minimum of two years, marking a pivotal moment for the exchange and its founders, Chun “Michael” Gan and Ke “Eric” Tang, who will also be leaving the company.
KuCoin’s operations have notably impacted the U.S. market, serving approximately 1.5 million registered users and generating an estimated $184.5 million in fees from this user base. Alarmingly, employees of KuCoin have previously promoted the absence of a know-your-customer (KYC) program, leading to serious regulatory concerns. Although a KYC process was finally adopted in August 2023, it was not enforced on existing customers, further complicating the exchange’s compliance stance.
In a bid to address these issues, Gan and Tang have agreed to forfeit around $2.7 million in funds obtained from KuCoin’s U.S. operations. In a recent press release, Gan expressed his intention to step down, asserting that he had no intention of violating U.S. or international law, and emphasized the need for KuCoin to adapt for future success.
Despite the legal challenges, KuCoin’s native token, KCS, has shown a 10% increase on the day, according to CoinGecko data, although its trading volume remains low.
This case serves as a crucial reminder for cryptocurrency exchanges operating in the United States and beyond. As regulatory scrutiny intensifies, it becomes imperative for businesses in the crypto space to implement robust compliance measures to safeguard against illicit activities and ensure the continued trust of their users.
