KuCoin has been hit with charges alleging the operation of an unlicensed crypto or digital asset derivatives exchange. The Commodity Futures Trading Commission (CFTC) filed the civil enforcement action in the US District Court for the Southern District of New York. The CFTC charged Mek Global Limited, PhoenixFin PTE Ltd., Flashdot Limited, and Peken Global Limited, which are said to operate a centralized digital asset exchange under the name KuCoin.
At the same time, the US Attorney’s Office for the Southern District of New York has filed a criminal indictment against the above companies charging them with violating the Bank Secrecy Act, operating an unlicensed money transmitter business, and conspiracy to violate the Bank Secrecy Act and operate as an unlicensed money transmitter business.
KuCoin is currently listed as the 7th largest crypto exchange in the world, according to Coinmarketcap.
KuCoin is headquartered in Seychelles, with offices worldwide. According to its website, it does not currently offer services to US-based customers.
Apparently following the announcement by the CFTC, KuCoin posted it is “operating well, and the assets of our users are absolutely safe.”
“We are aware of the related reports and are currently investigating the details through our lawyers. KuCoin respect the laws and regulations of various countries and strictly adheres to compliance standards.”
The CFTC’s complaint claims that KuCoin “dealt in off-exchange commodity futures transactions and leveraged, margined, or financed retail commodity transactions; solicited and accepted orders for commodity futures, swaps, and leveraged, margined, or financed retail commodity transactions without registering with the CFTC as a futures commission merchant (FCM).”
The complaint alleges that KuCoin offered and executed commodity derivatives to and for people in the US from approximately July 2019 to approximately June 2023, and failed to implement required know-your-customer (KYC) compliance procedures.
The complaint also alleges that although KuCoin claimed to have implemented KYC procedures, but these processes were described as a “sham” and ineffective from blocking US users.
Of note is the fact that the CFTC describes the popular digital assets Bitcoin (BTC), Ether (ETH), and Litecoin (LTC) as Commodities.
The CFTC seeks disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the CEA and CFTC regulations.
The CFTC and DOJ are continuing a propensity for regulators to pursue alleged scofflaws anywhere in the world as long as they involve US users.