US prosecutors try to send warning to cryptocurrency world with KuCoin prosecution
NEW YORK — A top US prosecutor on Tuesday announced criminal charges against a once-rising company in the cryptocurrency space and two of its founders in an effort to send a message to other industry players to follow US laws.
U.S. Attorney Damian Williams said conspiracy charges against KuCoin and two executives should put other crypto exchanges on notice that they cannot serve U.S. customers without following U.S. laws. According to an indictment in Manhattan federal court, the company and its founders attempted to conceal the existence of its U.S. customer base.
In December, New York Attorney General Letitia James secured a payout of more than $22 million from KuCoin to return $16.7 million to more than 150,000 New York investors and provide New York State with more than $5.3 million. KuCoin also had to cease operations in New York after falsely representing itself as a crypto exchange without registering as a securities and commodities broker-dealer, James said.
Williams said in a press release that KuCoin, founded in 2017, “leveraged its sizable U.S. customer base to become one of the world’s largest cryptocurrency derivatives and spot exchanges, with billions of dollars in daily transactions and trillions of dollars in annual trading volume. ”
He said the company deliberately chose to ignore US laws designed to help identify and eliminate crime and corrupt financing schemes on financial platforms. As a result, authorities say the company was used as a vehicle to launder large sums of money from criminal malware, ransomware and fraud schemes.
KuCoin failed to implement even basic anti-money laundering policies as it allowed customers to handle more than $4 billion in suspicious and criminal funds while KuCoin operated in the shadows of the financial markets and provided a haven for illegal money laundering money, Williams said.
Darren McCormack, head of the New York office of Homeland Security Investigations, said prosecutors are exposing one of the largest global cryptocurrency exchanges as a multibillion-dollar criminal conspiracy.
“KuCoin grew to serve more than 30 million customers despite its perceived failure to follow the laws necessary to ensure the security and stability of our world’s digital banking infrastructure,” McCormack said.
In a statement on social media, the company said it was “functioning well and our users’ assets are absolutely safe.”
It added: “We are aware of the related reports and are currently investigating the details through our lawyers. KuCoin respects the laws and regulations of various countries and strictly adheres to compliance standards.”
Also on social media, the company’s CEO, who identified himself as “Johnny,” said that “the regulatory issue regarding KuCoin has come to my attention. While we are working on it, the platform remains unaffected and functions normally as usual. With us your belongings are safe and sound. Our team and I will provide timely updates on progress.”
Indicted along with the company were Chun Gan, 34, and Ke Tang, 39, two of the company’s founders and both nationals of China. They are charged with conspiracy to violate the Bank Secrecy Act and with conspiracy to operate an unlicensed money transmission business, but they remain at large.
The Bank Secrecy Act charge stemmed from the men’s failure to maintain an adequate anti-money laundering program to prevent KuCoin from being used for money laundering and terrorist financing, along with failing to verify of customers and failure to file suspicious activity reports common in the financial industry, prosecutors said.
Three companies doing business under the name KuCoin were established in the Cayman Islands, the Republic of Seychelles and Singapore. They also faced conspiracy charges.
The KuCoin website on Tuesday greeted US residents with the following message: “Based on your IP address, we are not currently providing services in your country or region due to local laws, regulations or policies. We apologize for any inconvenience this may cause. If you are from a region where our services are available, please access our platform from a supported location to complete the KYC verification.”
The company claims that it has 30 million registered users in more than 200 countries and regions around the world.