KuCoin charged with AML violations that let cybercriminals launder billions

  • March 27, 2024
  • 10:08 AM
  • 0


The U.S. Department of Justice (DoJ) has charged global cryptocurrency exchange KuCoin and two of its founders for failing to adhere to anti-money laundering (AML) requirements, allowing threat actors to use the platform to launder money.

Founded in 2017 by Chinese citizens Chun Gan and Ke Tang, KuCoin is one of the largest cryptocurrency exchange platforms to buy, sell, trade, and store a variety of digital currencies. The platform also supports spot trading, futures trading, staking, and lending services.

In an indictment unsealed yesterday, the Department of Justice claims that KuCoin knowingly allowed U.S.-based users to trade on its platform while fulfilling none of its AML obligations, as defined by U.S. laws and regulations.

These obligations include implementing a "know your customer" (KYC) system, verifying customer identities, and filing suspicious activity reports with the authorities for further investigation.

Not only did KuCoin not comply with the rules, but the DOJ says the platform attempted to conceal they had U.S. customers to appear exempt from U.S. AML and KYC requirements. However, they advertised to U.S. customers that KYC was not required to use the platform.

The U.S. DOJ announcement says that KuCoin's lack of compliance resulted in the movement of at least $9 billion in crypto from suspicious sources, including ransomware gangs, darknet market profits, funds from malware operations, and financial fraud schemes.

"As a result of KuCoin's willful failures to maintain the required AML and KYC programs, KuCoin has been used as a vehicle to launder large sums of criminal proceeds, including proceeds from darknet markets and malware, ransomware, and fraud schemes," reads the Department of Justice announcement.

"Since its founding in 2017, KuCoin has received over $5 billion, and sent over $4 billion, of suspicious and criminal proceeds."

The two founders now face charges for conspiring to operate an unlicensed money-transmitting business and conspiring to violate the Bank Secrecy Act, carrying a maximum of five and ten years in prison, respectively.

Meanwhile, KuCoin's CEO, Johnny Lyu, responded with a thread on X, saying the company's charges are part of broader, industry-wide challenges related to growth and regulatory adaptation in the rapidly evolving cryptocurrency sector.