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KuCoin cryptocurrency exchange founders arrested and charged by federal law enforcement with violations of banking laws

The Law Office of Matthew Galluzzo, PLLC Team

Recently, the U.S. Attorney for the Southern District of New York announced an indictment charging two of the founders of a prominent cryptocurrency exchange with a variety of federal crimes relating to their alleged failure to prevent the exchange from becoming a tool of money launderers. Specifically, CHUN GAN, a/k/a “Michael,” and KE TANG, a/k/a “Eric,” the operators of the KuCoin cryptocurrency exchange, have been charged with “conspiring to operate an unlicensed money transmitting business and conspiring to violate the Bank Secrecy Act by willfully failing to maintain an adequate anti-money laundering (“AML”) program designed to prevent KuCoin from being used for money laundering and terrorist financing, failing to maintain reasonable procedures for verifying the identity of customers, and failing to file any suspicious activity reports.” KuCoin was also charged with operating an unlicensed money transmitting business and a substantive violation of the Bank Secrecy Act. As of the time of this article, Gan and Tang remain at large.

Since its founding in or about September 2017 by, KuCoin has become one of the largest global cryptocurrency exchange platforms. As of in or about March 2024, according to its

public website, KuCoin had over 30 million customers located in at least 207 countries and territories, and, according to a third-party public website, its daily spot trading volume exceeded $2.8 billion. KuCoin’s website also touts public rankings of cryptocurrency exchanges that place KuCoin in the top five worldwide. As of December 2023, one of these public rankings listed KuCoin as the fifth largest c1yptocurrency spot exchange based on traffic, liquidity, and trading volumes, among other factors, and the fourth largest cryptocurrency derivatives exchange based on liquidity and normalized volume, among other factors.

Though KuCoin had customers from all over the world, it made itself susceptible to American banking and anti-money laundering regulations by soliciting business from American clients and institutions. As such, according to the Bank Secrecy Act and other related regulations, it was required to implement an anti-money laundering program and make reports of suspicious activity. The defendants are also indicted for allegedly conspiring to operate an unregistered money transmitting business.

According to a press release from the U.S. Attorney’s Office:

“[A]t all relevant times, KuCoin has been a money transmitting business required to register with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) and, since July 2019, has been a futures commission merchant required to register with the U.S. Commodity and Futures Trading Commission (“CFTC”). As a money transmitting business and a futures commission merchant, KuCoin is required to comply with the applicable Bank Secrecy Act provisions requiring maintenance of an adequate AML program, including customer identity verification, or know-your-customer (“KYC”) processes. AML and KYC programs ensure that financial institutions, such as KuCoin, are not used for illicit purposes, including money laundering.

GAN, TANG, and KuCoin were aware of their U.S. AML obligations but willfully chose to flout those requirements. KuCoin failed, for example, to implement an adequate KYC program. Indeed, until at least July 2023, KuCoin did not require customers to provide any identifying information. It was only in July 2023, after KuCoin was notified of a federal criminal investigation into its activities, that KuCoin belatedly adopted a KYC program for new customers. However, this KYC process applied to new customers only and did not apply to KuCoin’s millions of existing customers, including the substantial number of customers based in the United States. KuCoin also never filed any required suspicious activity reports, never registered with the CFTC as a futures commission merchant, and, through at least the end of 2023, never registered with FinCEN as a money transmitting business.

In fact, GAN, TANG, and KuCoin affirmatively attempted to conceal the existence of KuCoin’s U.S. customers in order to make it appear as if KuCoin was exempt from U.S. AML and KYC requirements. Despite the fact that KuCoin gathered and tracked location information for its customers, KuCoin actively prevented its U.S. customers from identifying themselves as such when opening KuCoin accounts. And KuCoin lied to at least one investor, in 2022, about where its customers were located, falsely representing that it had no U.S. customers when, in truth, KuCoin had a substantial U.S. customer base. In fact, in a number of social media posts, KuCoin actively marketed itself to U.S. customers as an exchange where they could trade without having to undergo KYC. For example, KuCoin stated in an April 2022 message on Twitter that “KYC is not supported to USA users, however, it is not mandatory on KuCoin to do KYC. Usual transactions can be done using an unverified account-“”

The named individual defendants face as much as twenty years in prison for their crimes. Given the amount of money that was trasmitted through the exchange, their sentencing exposure under the Federal Sentencing Guidelines stands to be significant, as well.

The proliferation of cryptocurrency and cryptocurrency exchanges operating internationally (like KuCoin) has presented serious anti-money laundering challenges for American regulators and law enforcement. However, operating an exchange has also become especially complicated in the modern world of cryptocurrency. The inherent complexity and volume of the business on these exchanges in some circumstances could be used as defenses by operators accused of doing so unlawfully. Matthew Galluzzo, a former Manhattan prosecutor, has successfully defended individuals in New York accused of operating unregistered or illegal money transmitting businesses. If you or a loved one have been arrested for such a crime, you should strongly consider contacting him about representation.

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