KuCoin and Founders Charged for Violations of Bank Secrecy Act and Commodity Exchange Act

CFTC and Kucoin banners

Cryptocurrency exchange KuCoin, along with its founders GAN and TANG, are facing criminal charges for breaching the Bank Secrecy Act and the Commodity Exchange Act. This follows an investigation by the Commodity Futures Trading Commission (CFTC), which filed a civil enforcement action against Mek Global Limited, PhoenixFin PTE Ltd., Flashdot Limited, and Peken Global Limited, collectively operating as KuCoin.

Off-Exchange Commodities Futures Transactions

In a recent development, cryptocurrency exchange KuCoin and two of its founders, GAN and TANG, face criminal charges related to violations of the Bank Secrecy Act and the Commodity Exchange Act (CEA). The charges carry a maximum penalty of five years in prison.

The charges against KuCoin include illegally conducting off-exchange commodity futures transactions and leveraging, margining, or financing retail commodity transactions. Additionally, KuCoin is accused of failing to register with the CFTC as a futures commission merchant (FCM), failing to diligently supervise its FCM activities, and operating a facility for trading or processing swaps without proper registration.

“For too long, some offshore crypto exchanges have followed a now-familiar playbook by offering derivative products and falsely claiming people in the United States cannot use their platforms, when in reality, anyone in the U.S. with commonly used technology can trade without providing basic customer identifying information,” said Director of Enforcement Ian McGinley.

Failure to Implement Effective KYC

The CFTC alleges that KuCoin allowed U.S. customers to trade commodity futures, swaps, and leveraged, margined, or financed commodity transactions, despite claims that the platform restricted U.S. users. The exchange purportedly failed to implement effective know-your-customer (KYC) procedures and IP address restrictions to prevent U.S. customers from accessing its services.

#KuCoin is operating well, and the assets of our users are absolutely safe. We are aware of the related reports and are currently investigating the details through our lawyers. KuCoin respect the laws and regulations of various countries and strictly adheres to compliance…

— KuCoin (@kucoincom) March 26, 2024

The lawsuit seeks disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations. KuCoin has responded, stating that it is investigating the matter with its lawyers and reaffirming its commitment to compliance with laws and regulations.

Author: Candace

Candace loves the arts. She holds some bitcoins.