On Tuesday, the Department of Justice (DOJ) in the United States charged crypto exchange KuCoin, along with two of its founders, with conspiracy to violate the Bank Secrecy Act.
As per the charges, the platform failed to operate a compliant anti-money laundering (AML) program which it enabled terrorist activity and money laundering to funnel through it.
The charges
Damian Williams, a US Attorney, said that even basic anti-money laundering policies had not been implemented and this allowed the crypto exchange to operate in the shadows of the financial markets.
He said that KuCoin had been used as a haven for illicit money laundering and had received more than $5 billion and sent over $4 billion in criminal and suspicious funds.
Phoenixfin Private Limited, Peken Global Limited, Flashdot Limited, and KuCoin founders, Ke Tang and Chun Gan, both of whom are Chinese citizens, were charged by the DOJ.
The founders are currently at large and the crypto exchange is also believed to have been operating an unlicensed money transmitting business.
As per the DOJ, the company sought business for both its futures and spot exchanges from US customers.
Further details
The DOJ stated that the crypto exchange had not registered with the Financial Crimes Enforcement Network (FinCEN) of the US Department of Treasury as a money transmitting business.
It had also not registered with the Commodity Futures Trading Commission (CFTC) as a futures commission merchant.
Darren McCormack, the HSI Acting Special Agent in Charge, said that their investigation had revealed that one of the biggest global crypto exchanges was an alleged multibillion-dollar criminal conspiracy.
According to the Feds, the crypto exchange had not implemented a know-your-customer (KYC) program on its platform until July 2023.
Even then, the KYC program had only been introduced to new customers. The DOJ said that existing customers had not been asked to comply with the said program.
The Feds also alleged that the exchange’s marketing efforts had directly appealed to US customers, but it tried to hide the fact that it had customers in the US.
The impact
The news of the charges filed by the Department of Justice against KuCoin and its founders saw a strong impact on the native crypto ecosystem of the exchange.
The value of KuCoin shares plummeted within hours of the announcement. There was a drop of 12% recorded, which saw them decline to $12.55 from $14.40.
This is the worst day for KuCoin shares since December 2023 and tests the support of the exponential moving average (EMA) of the token of the last 55 days.
So far, it seems that the token’s EMA55 is holding strong, but there might be long-term impacts on the exchange itself, as well as its native token.