KuCoin and its two founders, Chun Gan and Ke Tang, are reported to have been officially sued by the US government. There are two main charges in this case, each possibly carrying a penalty of around 5 to 10 years.
Following this news, many KuCoin users have initiated fund withdrawals, amounting to as much as $500 million overall.
KuCoin Sued by US Government
The US government, through the Southern District of the United States Attorney’s Office and the Department of Homeland Security Investigation, has officially filed lawsuits against KuCoin and its two founders for two violations of US financial regulations.
This lawsuit was formally announced through a publication distributed on the official website of the United States Department of Justice. The publication outlines two main charges: violation of the Bank Secrecy Act regulations and aiding and abetting illegal money transactions through their business platform.
Both charges stem from the lack of a comprehensive Know Your Customer (KYC) process that should have been conducted by KuCoin users. Unfortunately, KuCoin only implemented this method starting in 2023, despite being established in 2017. As a result, only new users have gone through this process, while existing users remain unverified to date.
This non-compliance is deemed to violate anti-money laundering laws or regulations. Consequently, the lawsuit alleges that KuCoin facilitated illegal transactions involving income that violates US financial and tax laws, as well as accommodating transactions for terrorists.
According to US government prosecutors, around $5 Billion has flowed into KuCoin and $4 Billion out of KuCoin, serving as evidence of these illegal transactions.
These charges are further complicated by accusations from the US government that KuCoin and its founders manipulated user data, allegedly creating a facade that no users originated from the US to avoid compliance with US regulations.
From these charges, there are potentially two sentences: a maximum of 5 years for facilitating illegal transaction platform charges and 10 years for violating the bank secrecy act through inadequate user verification.
$500 Million Withdrawn
Regarding this case, there is still no indication of when the court trial will take place and whether KuCoin and its founders will face permanent or temporary shutdown.
However, this news has sparked concerns among its users, as evidenced by the $500 million withdrawn, as reported by the Twitter account SpotOnChain.
Among all the funds withdrawn, the top five cryptocurrencies from KuCoin are USDT, ETH, ONDO, FET, and GHX, with USDT having the largest amount at $274 million.
From last night until now, there have been several incidents hindering users from withdrawing funds, possibly due to the high volume of withdrawals from KuCoin.
KuCoin has had previous interactions with the US government, so this is not their first encounter. Nevertheless, this lawsuit is significant as it has been taken to court, leading to heightened concerns.
The main concern is the possibility of KuCoin facing a fate similar to FTX, where all transactions cease, and many funds become inaccessible.
On the flip side, there is a chance KuCoin could recover, as seen with Binance, which faced a similar situation but has since bounced back.
KuCoin is one of the largest crypto exchanges globally, so this event could have a negative impact on the market if it continues.
Therefore, for KuCoin users, it’s advisable to start withdrawing funds and securing them elsewhere. For the crypto market as a whole, alongside this news, there is a possibility of volatility affecting some major cryptocurrencies, although not significantly.
