The U.S. has sued KuCoin—what happened?
TechFlow Selected TechFlow Selected
The U.S. has sued KuCoin—what happened?
Currently, KuCoin is operating normally, and user assets are secure.
Navigating Web3 tides with focused insightsWritten by: Carbon Value
On March 26, according to an official announcement from the U.S. Department of Justice, cryptocurrency exchange KuCoin and its two founders have been charged with violations of the Bank Secrecy Act and unlicensed money transmitting. KuCoin and its founders Chun Gan and Ke Tang are being prosecuted by the U.S. Attorney’s Office for the Southern District of New York for violating U.S. anti-money laundering laws and operating an unlicensed money transmitting business. The charges include conspiracy to operate an unlicensed money transmitting business and violations of the Bank Secrecy Act for failing to maintain adequate anti-money laundering procedures designed to prevent money laundering and terrorist financing. KuCoin is accused of leveraging its substantial user base in the United States to become one of the world's largest cryptocurrency exchanges while failing to comply with U.S. legal requirements.
Public records show that KuCoin was founded in 2017. In July 2019, it launched its futures trading platform. To date, KuCoin has grown into one of the largest global cryptocurrency exchanges, serving over 30 million customers with a daily trading volume worth billions of dollars. KuCoin ranks among the top five globally in public cryptocurrency exchange rankings. One ranking lists KuCoin as the fourth-largest cryptocurrency derivatives exchange and fifth-largest spot cryptocurrency exchange.
Additionally, according to recent foreign media reports, the U.S. Commodity Futures Trading Commission (CFTC) 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—entities collectively operating the centralized digital asset exchange known as KuCoin—of repeatedly violating the Commodity Exchange Act and CFTC regulations. In its ongoing litigation against KuCoin, the CFTC is seeking disgorgement of illegal gains, civil penalties, permanent trading and registration bans, and a permanent injunction against further violations of the CEA and CFTC rules.
As of now, KuCoin has responded via the X platform stating that the platform is operating normally, user assets are secure, and it is aware of the reports and currently investigating the details through legal counsel. KuCoin emphasizes respect for the laws and regulations of all countries and strict adherence to compliance standards.
Below is the full content of the indictment from the U.S. Attorney’s Office for the Southern District of New York. For reference only.
KuCoin and its two founders, Chun Gan and Ke Tang, ignored U.S. anti-money laundering laws and built KuCoin into one of the world’s largest cryptocurrency exchanges.
U.S. Attorney Damian Williams for the Southern District of New York and Acting Special Agent in Charge Darren McCormack of Homeland Security Investigations (HSI) New York announced today the unsealing of an indictment charging the global cryptocurrency exchange KuCoin and its two founders—CHUN GAN (a.k.a. Michael) and KE TANG (a.k.a. Eric)—with conspiring to operate an unlicensed money transmitting business and conspiring to violate the Bank Secrecy Act by willfully failing to maintain an adequate anti-money laundering (AML) program designed to prevent the use of KuCoin for money laundering and terrorist financing, failing to maintain reasonable procedures to verify customer identities, and failing to file any suspicious activity reports. Additionally, KuCoin is charged with operating an unlicensed money transmitting business and materially violating the Bank Secrecy Act. GAN and TANG remain at large.
U.S. Attorney Damian Williams said: “As alleged in today’s indictment, KuCoin and its founders deliberately concealed the fact that a significant number of U.S. users were trading on the KuCoin platform. In fact, KuCoin is alleged to have leveraged its vast U.S. customer base to become one of the world’s largest cryptocurrency derivatives and spot exchanges, with daily trading volumes reaching billions of dollars and annual trading volumes reaching trillions. However, financial institutions like KuCoin that seek to benefit from the unique opportunities provided by the United States must also abide by U.S. laws, helping to identify and stop criminal and corrupt financing schemes. Allegedly, KuCoin made a deliberate choice not to do so. Due to the defendants’ failure even to implement basic anti-money laundering policies, they allowed KuCoin to operate in the shadows of the financial markets and serve as a safe haven for illicit money laundering—receiving more than $5 billion in suspicious and criminal proceeds and transmitting out more than $4 billion in suspicious and criminal proceeds. Cryptocurrency exchanges like KuCoin cannot have it both ways. Today’s indictment sends a clear message to other crypto exchanges: if you plan to serve U.S. customers, you must follow U.S. laws—period.”
HSI Acting Special Agent in Charge Darren McCormack said: “Today, we expose the true face of one of the world’s largest cryptocurrency exchanges: an alleged multi-billion-dollar criminal enterprise. Despite being accused of failing to comply with laws essential to ensuring the security and stability of the world’s digital banking infrastructure, KuCoin continued serving over 30 million customers. The defendants’ alleged pattern of evading these critical laws is now over. I commend the HSI New York El Dorado Task Force and our law enforcement partners for their commitment to this mission.”
According to allegations in the indictment and statements made by KuCoin on its website:
FLASHDOT LIMITED (formerly Phoenixfin Limited), PEKEN GLOBAL LIMITED, and PHOENIXFIN PRIVATE LIMITED are three entities operating under the name of the global cryptocurrency exchange KuCoin. GAN, TANG, and others founded KuCoin in September 2017.
KuCoin solicited U.S. customers through its spot trading platform and later through its futures trading platform, launched in July 2019. Since its founding in 2017, KuCoin has become one of the largest global cryptocurrency exchange platforms, serving over 30 million customers with a daily trading volume worth billions of dollars in cryptocurrencies. KuCoin’s website ranks among the top five globally in public cryptocurrency exchange rankings. One such public ranking lists KuCoin as the fourth-largest cryptocurrency derivatives exchange and fifth-largest cryptocurrency spot exchange. KuCoin, GAN, and TANG sought to serve—and indeed served—numerous customers located in the United States and within the Southern District of New York.
Therefore, during all relevant periods, KuCoin was a money transmitting business required to register with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury. Since July 2019, KuCoin has also been required to register with the U.S. Commodity Futures Trading Commission (CFTC) as a futures commission merchant. As a money transmitter and futures commission merchant, KuCoin was obligated to comply with applicable provisions of the Bank Secrecy Act, including maintaining an adequate anti-money laundering program featuring customer identification or KYC procedures. AML and KYC programs ensure that financial institutions like KuCoin are not used for illegal purposes such as money laundering.
GAN, TANG, and KuCoin knew of their anti-money laundering obligations in the United States but deliberately chose to ignore them. For example, KuCoin did not implement an adequate KYC program. In fact, until at least July 2023, KuCoin did not require customers to provide any identity information. Only after being informed of a federal criminal investigation into its activities in July 2023 did KuCoin belatedly adopt KYC procedures for new customers. However, this KYC process applied only to new customers and not to KuCoin’s millions of existing customers, including a large number located in the United States. KuCoin never filed any suspicious activity reports as required, never registered with the CFTC as a futures commission merchant, and did not register with FinCEN as a money transmitting business until at least the end of 2023.
In fact, GAN, TANG, and KuCoin attempted to conceal the existence of KuCoin’s U.S. customers, making KuCoin appear exempt from U.S. anti-money laundering and KYC requirements. Although KuCoin collected and tracked customer location data, it actively prevented U.S. customers from identifying themselves when opening KuCoin accounts. In 2022, KuCoin falsely told at least one investor about the location of its customers, claiming it had no U.S. customers, while in reality, it maintained a large U.S. customer base. Indeed, in various social media posts, KuCoin actively marketed itself to U.S. customers as an exchange where they could trade without undergoing KYC. For example, in April 2022, KuCoin posted on Twitter: “KYC is not supported for U.S. users, but KuCoin does not mandate KYC for users. Regular trading can be done using unverified accounts.”
Because KuCoin intentionally failed to maintain required anti-money laundering and KYC programs, it has been used as a tool to launder substantial criminal proceeds, including revenues derived from darknet markets, malware, ransomware, and fraud schemes. Since its founding in 2017, KuCoin has received over $5 billion in suspicious and criminal proceeds and transmitted out over $4 billion in suspicious and criminal proceeds. Many KuCoin customers specifically used its trading platform due to the anonymity it offered. In other words, KuCoin’s no-KYC policy was an essential factor in its growth and success.
Both GAN and TANG, who are Chinese citizens, are each charged with one count of conspiracy to violate the Bank Secrecy Act and one count of conspiracy to operate an unlicensed money transmitting business, each carrying a maximum penalty of five years in prison.
FLASHDOT LIMITED (a Cayman Islands-registered entity), PEKEN GLOBAL LIMITED (a Seychelles Republic-registered entity), and PHOENIXFIN PRIVATE LIMITED (a Singapore-registered entity, collectively known as KuCoin) are each charged with one count of conspiracy to violate the Bank Secrecy Act, punishable by up to five years in prison; one count of conspiracy to operate an unlicensed money transmitting business, punishable by up to five years in prison; one count of violating the Bank Secrecy Act, punishable by up to ten years in prison; and one count of operating an unlicensed money transmitting business, punishable by up to five years in prison.
The maximum potential sentence for each defendant is set by Congress and is provided for informational purposes only; any actual sentence will be determined by the judge.
Mr. Williams praised the outstanding investigative work of the HSI New York El Dorado Task Force. Mr. Williams also expressed gratitude to the Commodity Futures Trading Commission, which today filed a parallel civil action against KuCoin.
This case is being handled by the Office’s Illegal Finance and Money Laundering Unit. Assistant U.S. Attorneys Emily Deininger and David R. Felton are prosecuting the case.
The charges contained in the indictment are merely allegations, and the defendants are presumed innocent unless proven guilty beyond a reasonable doubt.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
