The US Department of Justice announced last night (26) that KuCoin, a cryptocurrency exchange, and its founders Chun Gan (also known as Michael) and Ke Tang (also known as Eric) have been indicted by the US Southern District of New York for violating US anti-money laundering regulations and engaging in unauthorized currency transmission operations.
Prosecutors: KuCoin and its founders intentionally concealed a large number of US users
According to the announcement by the Department of Justice, US prosecutors believe that KuCoin and its founders were aware of their obligations under US anti-money laundering regulations but deliberately chose to ignore them. Damian Williams, the US prosecutor, stated, “They knew they were required to comply with the Bank Secrecy Act, yet they chose to ignore those requirements.” Darren McCormack, an investigator from the New York Homeland Security Investigations office, also accused them, saying, “They deliberately and willfully operated an unlicensed money transmitting business.”
However, it is worth mentioning that the Department of Justice also stated in the announcement that although the prosecutors have filed charges against KuCoin and its founders, they will be considered innocent unless there is evidence of guilt.
CFTC accuses KuCoin of operating an illegal exchange
At the same time, the US Commodity Futures Trading Commission (CFTC) has filed a civil lawsuit with the US Southern District Court of New York, accusing Mek Global Limited, PhoenixFin PTE Ltd., Flashdot Limited, and Peken Global Limited of jointly operating KuCoin and repeatedly violating the Commodity Exchange Act (CEA) and CFTC regulations. The indictment alleges various violations, including:
In the lawsuit against KuCoin, the CFTC seeks the return of illegal proceeds, civil penalties, permanent trading and registration bans, and permanent injunctions against further violations of the CEA and CFTC regulations.
KuCoin’s response: The exchange is operating normally
In response to these accusations, KuCoin quickly responded at 23:40 last night, stating, “KuCoin is operating as usual and will continue to provide safe and reliable services to users.”
Community reactions
Currently, KuCoin has not provided detailed explanations regarding this matter, only assuring that the exchange is operating normally. However, some community users have expressed the belief that this may be a deliberate crackdown by US regulatory agencies on the exchange.
Is there a run on KuCoin?
After the news of the indictment was released, some community members expressed concerns about whether it would trigger a run on the exchange and threaten the security of customer funds. So far, there have been reports of slow withdrawal speeds for assets, but apart from certain currencies, there doesn’t seem to be a suspension of withdrawals.
However, there have been significant outflows of assets. According to Defillama data, KuCoin had outflows of $169 million in the past 24 hours, making it the second-largest outflow among the top ten exchanges. Users who have assets on KuCoin are advised to consider transferring them to ensure their safety.
KuCoin previously settled for $22 million with the New York Department of Justice
Based on past experience, if KuCoin wants to continue operating, it may reach a settlement with US regulators, pay fines, and withdraw from the US market. However, further observation is needed.
In fact, as early as March last year, KuCoin was sued by the New York Attorney General Letitia James, accusing the exchange of operating as a cryptocurrency trading platform and facilitating the trading of cryptocurrencies, including ETH and LUNA, through its website and app without registering with the US Securities and Exchange Commission (SEC) or the CFTC. KuCoin also promoted unregistered securities on its platform, including its lending and staking product, KuCoin Earn. KuCoin reached a settlement with the New York State Department of Justice at the end of last year, paying a total of $22 million in fines and agreeing to withdraw from the New York market.
KuCoin’s native token, KCS, plummets
Affected by this news, KuCoin’s native token, KCS, quickly fell from around $14.3 to $12.5 last night, with a 24-hour decline of 12.44%.
KuCoin ranks 7th among global centralized exchanges
Founded in September 2017 and headquartered in Seychelles, KuCoin is currently ranked as the 7th largest centralized exchange globally with a comprehensive score of 6.9, according to CoinMarketCap data. It has a daily trading volume of over $2.3 billion and supports trading of up to 784 cryptocurrencies.
Extended reading:
Global and Taiwanese cryptocurrency exchange rankings for 2024: Trading volume, security, and cryptocurrencies – a must-read for crypto investment beginners.
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