KuCoin, a well-known cryptocurrency exchange, has admitted to running an unlicensed money-transmitting business in the United States. This admission comes with a hefty $300 million settlement and the resignation of its founders.
KuCoin’s legal troubles have been building for years. On Monday, Peken Global Ltd., one of the three companies that run KuCoin, pleaded guilty in a Manhattan federal court.
US District, Judge Andrew Carter, presided over the case, where the company was ordered to pay $113 million as a fine and forfeit another $184.5 million.
The case also directly implicated KuCoin’s founders, Chun Gan (Michael Gan) and Ke Tang (Eric Tang). Prosecutors accused them of deliberately breaking US laws by operating without proper licences and ignoring regulations designed to prevent money laundering.
Both founders agreed to step down from their roles at KuCoin and to forfeit $2.7 million each. As part of the settlement, KuCoin must also stop operating in the US for at least two years.
US Attorney, Danielle R. Sassoon, criticised KuCoin, saying, “For years, KuCoin avoided implementing required anti-money laundering policies designed to identify criminal actors and prevent illicit transactions”.
This failure allowed KuCoin to handle billions of dollars in suspicious transactions, including funds tied to illegal activities like darknet markets, ransomware, and fraud schemes.
The Justice Department also highlighted that KuCoin didn’t follow basic compliance steps, such as requiring customers to verify their identities.
Until mid-2023, the platform allowed users to trade without providing personal information, making it a target for criminal misuse.
KuCoin’s history with regulatory issues
This isn’t KuCoin’s first run-in with the law. Just a few months earlier, in December 2023, the company settled with the New York Attorney General’s Office, agreeing to pay $22 million in fines and refunds.
That case focused on KuCoin’s failure to register as a securities and commodities broker-dealer, as well as its false claims of being a legitimate cryptocurrency exchange.
As part of the New York settlement, KuCoin agreed to stop trading in the state. Authorities accused the exchange of lacking proper anti-money laundering (AML) and Know Your Customer (KYC) programs.
These programs are essential to prevent illegal activities, as they require businesses to verify who their customers are and monitor their transactions for suspicious activity.
KuCoin’s troubles aren’t limited to the US. In 2022, the Ontario Securities Commission in Canada banned the exchange from serving Canadian users, citing non-compliance with local regulations. Similarly, KuCoin had to exit the Indian market due to regulatory issues.
Despite these challenges, KuCoin has experienced rapid growth. Founded in 2017, the exchange reported having over 30 million registered users across 207 countries and territories by March 2024.
This global reach has made it a major player in the cryptocurrency space, but it has also attracted scrutiny from regulators worldwide.
A broader crackdown
The case against KuCoin is part of a larger push by US authorities to bring cryptocurrency platforms in line with financial regulations.
During Joe Biden’s presidency, the Justice Department and other agencies increased their efforts to enforce anti-money laundering laws and ensure compliance in the crypto industry.
KuCoin isn’t alone in facing penalties. Earlier this month, another Seychelles-based cryptocurrency exchange, BitMEX, was fined $100 million for violating US anti-money laundering laws.
BitMEX had failed to implement basic compliance measures required under the Bank Secrecy Act, such as verifying user identities and monitoring transactions for illegal activity. The Justice Department accused BitMEX of ignoring these requirements to boost its profits.
According to US regulators, enforcement actions against crypto companies have been significant. By October 2024, authorities reported collecting over $19 billion in fines from cryptocurrency businesses. These penalties account for nearly two-thirds of all regulatory settlements in the industry to date.
Political changes in the US may influence how regulators approach the cryptocurrency market in the future. With the recent inauguration of President Donald Trump, who has promised to reduce government oversight of the crypto industry, the landscape could shift.
However, the cases against KuCoin and BitMEX reflect the culmination of years of regulatory action aimed at holding crypto companies accountable.
What’s next for KuCoin?
As part of its settlement, KuCoin has pledged to improve its compliance practices and strengthen its platform’s security. In a statement on 28 January, the company assured users that its operations outside the US would remain unaffected. It also highlighted recent efforts to bolster its compliance framework.
Michael Gan, who is one of the founders, described the settlement as “a favourable outcome.” He stated, “I appreciate the DOJ’s constructive approach in reaching this resolution, which reflects my lack of any intent to violate US law or involvement in money laundering, fraud, or similar criminal actions”.
Gan added that the settlement provides “much-needed clarity and paves a clear path forward” for KuCoin.
As part of the leadership changes, KuCoin’s Chief Legal Officer, BC Wong, will take over as CEO. The company’s next steps will likely involve rebuilding its reputation and ensuring compliance in an increasingly regulated environment.
