KuCoin Pleads Guilty to Unlicensed Money Transmission Charge
KuCoin pleaded guilty to operating an unlicensed money-transmitting business in a settlement with the U.S. Department of Justice on Jan. 27. The exchange agreed to exit the U.S. market for two years and pay penalties nearing $300 million. This plea addresses allegations that KuCoin failed to register with the Financial Crimes Enforcement Network, maintain anti-money-laundering safeguards, and report suspicious activities, as per the U.S. Attorney’s Office for the Southern District of New York.
Court Documents and Allegations
- KuCoin, founded in 2017 and operated by Seychelles-based Peken Global Limited, served approximately 1.5 million U.S. users and earned about $184.5 million in fees.
- The platform allowed billions of dollars worth of suspicious transactions, including potential proceeds from darknet markets, fraud schemes, and other illicit sources.
- Company founders Chun Gan (Michael) and Ke Tang (Eric) face deferred prosecution and will not manage the exchange during the two years.
Compliance Issues and Response
- KuCoin did not require users to provide identifying information until August 2023.
- Employees described know-your-customer checks as optional, even for U.S.-based users.
- KuCoin never filed mandatory suspicious activity reports.
- Newly appointed CEO BC Wong expressed optimism about future compliance and plans to innovate while ensuring regulatory adherence.
Financial Impact and Settlement Terms
- KuCoin’s KCS token rose 13.7% following news of the plea agreement.
- The plea deal requires KuCoin to forfeit $184.5 million and pay an additional criminal fine of about $112.9 million.
- Each founder agreed to surrender $2.7 million in proceeds.
Conclusion and Implications
Prosecutors emphasized that KuCoin’s failures in compliance facilitated large-scale laundering of potentially criminal funds. The resolution serves as a warning for businesses that disregard U.S. financial rules. KuCoin will be off-limits to U.S. customers for at least two years, and the two founders will not be involved in operations during that period.