KuCoin Failed to Comply With Money Laundering Rules, Used for $9 Billion in Suspect Crypto Trades, US Says

KuCoin had a net outflow of $278 million in stablecoins on Tuesday, the most in a day since the November 2022 collapse of FTX.

By Allyson Versprille, Bloomberg | Updated: 28 March 2024 14:39 IST

KuCoin Failed to Comply With Money Laundering Rules, Used for $9 Billion in Suspect Crypto Trades, US Says

Photo Credit: Bloomberg

KuCoin was founded in September 2017 and is one of the largest crypto exchanges

Highlights

KuCoin was allegedly used for $9 Billion in suspect crypto trades
The exchange was charged with flouting US anti-money laundering rules
The CFTC also brought a case against KuCoin on Tuesday

US prosecutors charged KuCoin, one of the world's largest cryptocurrency exchanges, and two of its founders for failing to comply with American anti-money laundering rules.

Since KuCoin's inception in September 2017, the exchange “willfully failed” to establish and maintain a program to keep the platform from being used for illicit activity, including terrorist financing, federal prosecutors in Manhattan alleged Tuesday. The company also didn't put proper controls in place to verify customers' identities or file reports on suspicious transactions on the exchange, according to the US Attorney's Office for the Southern District of New York.

“In failing to implement even basic anti-money laundering policies, the defendants allowed KuCoin to operate in the shadows of the financial markets and be used as a haven for illicit money laundering,” US Attorney Damian Williams said in a statement. He added that the exchange received more than $5 billion and sent more $4 billion of suspicious and criminal funds.

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The Commodity Futures Trading Commission, which oversees derivatives markets, also brought a case against the firm on Tuesday.

The news caused a stampede to pull money from KuCoin. The exchange had a net outflow of $278 million in stablecoins on Tuesday, the most in a day since the November 2022 collapse of FTX, based on data from CryptoQuant data.

“KuCoin is operating well, and the assets of our users are absolutely safe,” the company said in a statement in response to the allegations. “We are aware of the related reports and are currently investigating the details through our lawyers.” KuCoin also said it respects “the laws and regulations of various countries and strictly adheres to compliance standards.”

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The prosecutors said the company took steps to conceal that a large number of American customers used the platform in order to claim it was exempt from US requirements, the prosecutors said. “Today's indictment should send a clear message to other crypto exchanges: if you plan to serve US customers, you must follow US law, plain and simple,” Williams said.

KuCoin is one of the largest spot crypto exchange in the world with a daily trading volume of more than $2 billion, according to CoinMarketCap.

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