Apr 15, 2024

The US Government Indicts KuCoin Exchange and Founders on Criminal Charges

  • The Attorney’s Office in the Southern District of New York summoned popular crypto exchange KuCoin and its founders on criminal charges. The two parties were accused of breaking the Bank Secrecy and Transmission Acts.
  • The Commodity Futures Trading Commission (CFTC) filed another lawsuit against KuCoin, alleging it allowed the trade of illegal commodities like Ethereum and Litecoin. Moreover, the CFTC threatens gigantic penalties ranging from fines to permanent bans.

The US government indicted cryptocurrency exchange KuCoin and its two founders on 26 March for serious financial crimes. In a press release from the United States Southern District of New York, the exchange and founders were accused of breaking money transmission and Bank Secrecy Acts.

KuCoin founders Chun Gan and Ke Tang were named in the indictment, each of them receiving accusations of playing a role in KuCoin’s illegal activities. Apparently, they said the exchange broke so many laws in order to grow into one of the world’s largest crypto exchanges.

KuCoin and Founders Hit with Indictment

The crypto community was stunned when the news broke that KuCoin and its two founders were facing criminal charges. A press release from the US Attorney’s Office in the Southern District of New York highlighted a “multibillion-dollar criminal conspiracy.”

Attorney Damian Williams said KuCoin tried hiding the number of US users on the platform. Furthermore, there were also accusations that the crypto exchange was taking advantage of the large US customer base.

“As today’s Indictment alleges, KuCoin and its founders deliberately sought to conceal the fact that substantial numbers of U.S. users were trading on KuCoin’s platform. Indeed, KuCoin allegedly took advantage of its sizable U.S. customer base to become one of the world’s largest cryptocurrency derivatives and spot exchanges, with billions of dollars of daily trades and trillions of dollars of annual trade volume,” Damian Willams said.

KuCoin Lawsuit: CFTC Calls Ethereum & Litecoin Commodities

A new development emerged, with The Commodity Futures Trading Commission (CFTC) calling Ethereum (ETH) and Litecoin (LTC) in a fresh lawsuit against KuCoin. The CFTC filed a separate civil enforcement lawsuit against KuCoin, in addition to the criminal charges levied against them by the US government. Furthermore, the filing alleged that KuCoin transacted many commodities without registering them first with the CFTC. Moreover, Bitcoin, Ethereum, and Litecoin were the major commodities highlighted by the commission.

The US Government Indicts KuCoin Exchange and Founders on Criminal Charges

The accusations against the crypto exchange varied, with special highlights on each service they offered. The first was failing to register with the commission as a futures commission merchant (FCM). Secondly, the CFTC alleged that KuCoin allowed the trading or processing of swaps without registering with them as a swap execution facility (SEF). Lastly, they accused the customer identification program (CIP) of the crypto exchange as inadequate for US customers.

However, the CFTC sounded a warning to other crypto exchanges. Apparently, they noted that most crypto exchanges like KuCoin claim not to offer their derivative services to US customers even though they are easily accessible.

The Director of Enforcement, Ian McGinley, said:

“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.”

Subsequently, the CFTC says there will be consequences. The commission is seeking “civil momentary penalties, permanent trading and registration bans, and permanent injunction against further violations of the CEA and CFTC regulations.”

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