KuCoin CEO Johnny Lyu said the US criminal charges against the exchange will not affect the platform’s operational stability and assured users that their funds stay safe.
Lyu made the statement on social media after the US Department of Justice (DOJ) announced it will pursue criminal charges against the exchange for flouting anti-money laundering (AML) laws.
Lyu said:
“Your belongings are safe with us. Our team and I will provide timely updates on progress.”
KuCoin also has one official statement about the allegations and said his lawyers are investigating the details. The exchange similarly assured users that funds are “absolutely safe.”
Criminal charges
The United States Attorney’s Office for the Southern District of New York announced the indictment of KuCoin – along with founders Chun Gan (known as Michael) and Ke Tang (known as Eric) – on charges of operating without necessary legal authorization and failing comply with it. to the AML laws on March 26.
The indictment accuses the platform and its founders of circumventing the Bank Secrecy Act and operating an unlicensed money transmission business.
US attorney Damian Williams – who is leading the case – outlined the allegations, stating that KuCoin and its founders allegedly avoided US regulatory action despite having a significant user base in the country.
The indictment criticizes KuCoin for failing to implement key AML policies, which allegedly enabled the transfer of more than $9 billion in suspicious and illicit funds through the exchange.
The document also points out KuCoin’s late adoption of customer identification measures, which went into effect in July 2023 after the start of a federal investigation and did not retroactively apply to existing customers, including those in the US.
Additionally, the complaint alleges that KuCoin made efforts to conceal the presence of U.S. customers on its platform and misrepresented this information to investors. The exchange has been accused of promoting itself on social media as a platform where US users can trade anonymously.
Meanwhile, the charges against the exchange’s two founders include conspiring to operate an unlicensed money transmission business and violating the Bank Secrecy Act, with possible maximum penalties of five years in prison for each charge.
KuCoin and its affiliated entities face several charges, the most serious of which is a possible 10-year prison sentence for a substantial violation of the Bank Secrecy Act.
Crypto commodities
Specifically, the complaint states that KuCoin violated the Commodity Exchange Act (CEA) by failing to register with the CFTC, despite allowing users to trade commodities on the platform.
According to the filing:
“Bitcoin and other cryptocurrencies are “commodities” under the CEA.”
The filing does not specify the other cryptocurrencies and only mentions Bitcoin in connection with the CFTC complaint. However, the indictment mentions Ethereum in another section detailing KuCoin’s spot trading activities.
DeFi Education Fund board member Jake Chervinsky noted that the accompanying CFTC complaint against KuCoin specifically labels three cryptocurrencies as commodities: Bitcoin, Ethereum, and Litecoin.
The inclusion of ETH in the CFTC complaint is significant, given recent rumors that the SEC is investigating the Ethereum Foundation to try to label it as a security.
Chervinsky believes the inclusion implies that the CFTC is directly challenging the SEC’s approach to investigating Ethereum and other digital assets. This development represents a notable departure from the generally discreet position the agencies have taken in their jurisdictional overlap regarding crypto.
According to Chervinsky:
“This may seem minor, but it’s actually pretty ferocious inter-agency drama by DC standards.”
