KuCoin Admits to Unlicensed Money Transfer Operation, Faces $300M Fine

Seychelles-based crypto exchange KuCoin has admitted to operating an unlicensed money-transmitting business. Under the agreement, KuCoin will pay over $297 million in penalties, which includes $184.5 million in forfeiture and a $112.9 million fine. The company will also suspend its operations in the U.S. market for two years. As part of a deferred prosecution deal, founders Michael Gan and Eric Tang will surrender $2.7 million and step down from leadership roles.

**KuCoin’s AML and KYC Shortcomings**

Court documents indicate that KuCoin was founded around September 2017 and has since become one of the largest cryptocurrency exchanges globally, with over 30 million customers and billions in daily trading volumes. Between its inception and March 2024, KuCoin served approximately 1.5 million U.S. users, earning at least $184.5 million in fees. As a money transmitter, KuCoin was obligated to comply with the Bank Secrecy Act, which mandates a sufficient anti-money laundering (AML) program and know-your-customer (KYC) verifications.

Despite these requirements, the Department of Justice reported that KuCoin failed to establish an adequate KYC program. Until July 2023, users were not required to provide identifying information, and KuCoin employees publicly stated that KYC was optional, even responding to U.S.-based customers. In August 2023, KuCoin implemented mandatory KYC for new and active users, but did not enforce these requirements on users who only wanted to withdraw or close positions. Additionally, KuCoin did not register with FinCEN as a money-transmitting business and failed to submit mandatory suspicious activity reports.

US Attorney Danielle R. Sassoon commented, “For years, KuCoin avoided implementing required anti-money laundering policies designed to identify criminal actors and prevent illicit transactions. As a result, KuCoin was used to facilitate billions of dollars worth of suspicious transactions and to transmit potentially criminal proceeds, including proceeds from darknet markets and malware, ransomware, and fraud schemes.”

**KuCoin’s Response**

Despite regulatory issues in the U.S., KuCoin stated that its operations in other non-restrictive markets remain unaffected. In a statement to CryptoPotato, Gan described the settlement as “a favorable outcome” and announced that KuCoin’s chief legal officer, BC Wong, will take over as CEO. He also mentioned that all charges against him and Tang were dropped after meeting certain conditions, bringing clarity to the crypto exchange.

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