The Seychelles-based crypto exchange has just pleaded guilty to running an unlicensed money-transmitting operation.
And guess what? They’re staring down the barrel of a penalty—over $297 million.
Exile from the biggest market?
As part of this legal mess, KuCoin will be hitting the brakes on its U.S. operations for at least two years.
The founders, Michael Gan and Eric Tang, are also feeling the heat, and they’ll be giving up $2.7 million and stepping away from their leadership roles as part of a deferred prosecution deal.
KuCoin has been around since 2017 and has ballooned into one of the largest crypto exchanges out there, boasting over 30 million users and billions in daily trading volume.
But here’s the kicker, because from its launch until March 2024, it served about 1.5 million users in the U.S., raking in at least $184.5 million in fees without following the rules or obtaining licenses.
No KYC, no business?
As a money transmitter, KuCoin was supposed to play by the Bank Secrecy Act’s rules, think anti-money laundering programs and know-your-customer checks.
But according to the Department of Justice, they dropped the ball big time, because up until July 2023, users didn’t even need to provide identifying info, and KuCoin employees were out there saying KYC was optional.
It wasn’t until August 2023 that KuCoin finally rolled out mandatory KYC for new customers and those wanting to actively use their services.
But here’s where it gets murky, they didn’t enforce these rules on existing users who just wanted to withdraw or close their positions.
Surveillance and obedience and the land of the free
U.S. Attorney Danielle R. Sassoon didn’t hold back in her comments about KuCoin’s failings, and told that this lack of oversight allowed KuCoin to facilitate billions in suspicious transactions linked to shady activities like darknet markets and fraud schemes.
“For years, KuCoin avoided implementing required anti-money laundering policies designed to identify criminal actors and prevent illicit transactions.”
Despite all this drama in the U.S., KuCoin is trying to keep its chin up, stating that operations in other markets remain unaffected, even called the settlement a favorable outcome and announced that BC Wong would step up as CEO.
He also noted that all charges against Gan and Tang were dropped after meeting certain conditions.
Have you read it yet? New memecoins are more attractive for whales?
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