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KuCoin Founders Face AML Charges in US – Unlike Changpeng Zhao, They Remain at Large

Last Updated March 27, 2024 11:01 AM
James Morales
Last Updated March 27, 2024 11:01 AM
By James Morales
Verified by Peter Henn

Key Takeaways

  • The US Department of Justice (DoJ) has unsealed an indictment charging the founders of KuCoin with money laundering violations.
  • Like Binance, the Exchange stands accused of failing to put an adequate anti-money laundering program in place.
  • However, unlike Binance CEO Changpeng Zhao, KuCoin’s Chun (Michael) Gan and Ke (Eric) Tang remain at large.

The US Department of Justice (DoJ) has filed criminal charges against the cryptocurrency exchange KuCoin and two of its founders.

Echoing the high-profile arrest of Binance founder Changpeng Zhao last year, Chun “Michael” Gan and Ke “Eric” Tang have been charged with violations of the Bank Secrecy Act for allegedly failing to comply with anti-laundering (AML) regulations.

KuCoin US Business Scrutinized

The charges against Kucoin center on two allegations. Firstly, that the exchange operated an unlicensed money transfer business. Secondly, that it failed to maintain an adequate AML program.

On the second charge, the DoJ said  KuCoin didn’t implement appropriate Know-Your-Customer (KYC) procedures or submit any suspicious activity reports to the Financial Crimes Enforcement Network (FinCEN).

US Attorney Damian Williams said: “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.”

A lawyer for the Southern District of New York, Williams previously spearheaded the prosecution of FTX founder Sam Bankman Fried.

Founders Implicated in AML Bust

Although there is hardly a crypto exchange in operation that the US authorities haven’t penalized for AML compliance failures at some point, the KuCoin case stands out for the indictment of two of its founders.

Based in Seychelles for tax purposes, but essentially operating as a borderless offshore exchange for most of the last seven years, KuCoin rose to prominence in an era of lax crypto regulation.

Like Binance, HTX, and other leading exchanges that came of age before US authorities started to crack down on the practice, KuCoin onboarded American users but didn’t register with FinCEN.

According to the DoJ, the two indicted founders were aware of their AML responsibilities under US law. However, they “willfully chose to flout those requirements”. Both Gan and Tang currently remain at large. 

Similarity with Binance Case?

In many respects, the charges against KuCoin and its founders resemble those brought against Binance and its CEO Zhao in November.

Both crypto exchanges were charged for unlicensed money transmission and AML failures under the Bank Secrecy Act. Company founders were also implicated in the two cases. Both times, the DoJ concluded that the private nature of the businesses meant management couldn’t be shielded from responsibility.

Binance ultimately agreed to settle the charges against it by paying a $4 billion fine. Meanwhile, Zhao stepped down as CEO and is currently awaiting sentencing after pleading guilty to money laundering violations.

Who Are KuCoin’s Founders?

While Gan and Tang were instrumental in building KuCoin into the platform it is today, neither played the same public facing role as Zhao.

Before founding KuCoin, the pair worked together for Alibaba Group’s Ant Financial, where Tang first introduced Gan to Bitcoin. They wrote the first code for the exchange in 2013. By 2018, KuCoin had emerged as one of the most successful crypto exchanges in the world, raising $20 million in a Series A fundraising round.

In 2022, the business was restructured as KuGroup, with Gan taking on the role of Chairman. Since then, Johnny Lyu has served as KuCoin’s CEO, overseeing the exchange’s day-to-day operations.

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