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Manhattan federal prosecutors have dropped a legal bombshell, unveiling an indictment charging foreign cryptocurrency exchange KuCoin and its two China-based founders with grave accusations. The charges stem from their alleged failure to implement anti-money laundering protocols, purportedly allowing more than a staggering $5 billion worth of criminal funds to traverse through its trading platform.

KuCoin and Founders Face US Prosecution : Charges Against KuCoin and Founders

KuCoin and its various business entities, including Flashdot Ltd., Peken Global Ltd., and Phoenixfin Private Ltd., are each slapped with violating the Bank Secrecy Act. Additionally, they face allegations of operating an unlicensed money transmitting business and two related conspiracy counts.

Founders Chun "Michael" Gan, 34, and Ke "Eric" Tang, 39, are facing their own legal woes, charged with two counts of conspiracy each. Despite the charges, the two founders remain at large, shielded by China's non-extradition policy for its nationals.

Allegations and Deceptive Practices

Prosecutors assert that KuCoin, Gan, and Tang deliberately misrepresented their customer base, falsely claiming the absence of U.S. customers. However, they allegedly harbored a significant number of users based in the United States on their spot and futures trading platforms. This deception, according to the indictment, enabled them to evade registration with the U.S. Commodity Futures Trading Commission (CFTC) and the Financial Crimes Enforcement Network (FinCEN), all while neglecting to implement any anti-money laundering measures.

Mounting Evidence and Severe Consequences

The indictment paints a grim picture of KuCoin's operations, accusing the exchange of accepting a staggering $5.4 billion in illicit funds. These funds reportedly encompass proceeds from terrorism financing, cyberattacks, fraud schemes, and sanctions violations.

Damian Williams, U.S. attorney for the Southern District of New York, minced no words, stating, "In failing to implement even basic anti-money laundering policies, the defendants allowed KuCoin to operate in the shadows of the financial markets and be used as a haven for illicit money laundering."

Legal Ramifications and Industry Response

The indictment serves as a stark warning to crypto exchanges, with Williams emphasizing the necessity of compliance with U.S. laws. Meanwhile, the CFTC filed a parallel civil lawsuit against KuCoin's business entities, echoing the gravity of the allegations.