US: Crypto Traders Charged With Helping Criminals Launder Billions

Published: 29 March 2024

Paying OnlineGan and Tang, who remain at large, are charged with allowing criminals to launder billions in ill-gotten gains. (Photo: Images, Flickr, License)

By Henry Pope

The U.S. indicted Tuesday the two Chinese founders of a crypto exchange platform for violating several anti-money laundering (AML) laws, which prosecutors said helped millions of criminals and terrorist financiers launder billions of dollars.

Chun Gan and Ke Tang operated the unlicensed money transmitting business KuCoin and willfully ignored anti-money laundering measures meant to prevent criminals and terrorist financiers from freely moving their illegal funds around the world, U.S. authorities said.

“Today, we exposed one of the largest global cryptocurrency exchanges for what our investigation has found it to truly be: an alleged multibillion-dollar criminal conspiracy,” said HSI Acting Special Agent in Charge Darren McCormack.

The two founded the crypto exchange platform in 2017 and soon managed to solicit more than 30 million customers trading billions of dollars daily. At its peak, it was publicly listed as a top-five crypto exchange site.

As a result of its success, KuCoin was required to comply with the U.S. Bank Secrecy Act and maintain adequate AML programs, including know-your-customer (KYC) measures such as identity verification, to ensure that financial institutions are not exploited by criminals.

However, prosecutors state that Gan and Tang willfully sought to flout them.

“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,” U.S. Attorney Damian Williams said. He further alleged that the duo’s platform received more than US$5 billion in suspicious funds and sent more than $4 billion back to clients linked to criminal activity.

For instance, KuCoin failed to implement any sort of identity verification safeguards into its KYC protocols until at least July 2023, almost six years after the platform went live.

It was only after KuCoin was notified of a federal criminal investigation into its activities that it finally implemented a proper KYC program, but even then only for new customers. Millions of its pre-existing clients were grandfathered in and therefore did not have to identify themselves to continue trading on the site.

Additionally, it never once filed a suspicious activity report on any of its tens of millions traders; Gan and Tang also never even registered with the U.S. Department of Treasury’s Financial Crimes Enforcement Network as a money transmitting business, authorities said.

Not only that, but prosecutors allege that the two actively concealed the existence of their U.S. customers so that they could operate outside of the constraints of U.S. AML laws. The platform assured its users that they could trade with unverified accounts and stated on Twitter in 2022 that “KYC is not supported to USA users, however, it is not mandatory on KuCoin to do KYC.”

“Crypto exchanges like KuCoin cannot have it both ways,” Williams said.

As a result, the platform attracted swaths of criminals, seeking to launder billions in ill-gotten gains that stemmed from darknet markets, ransomware, and fraud schemes. The billions KuCoin earned in commission fees show that its no-KYC policy was integral to its growth and success, prosecutors said.

Gan and Tang’s operations also brought them into contact with entities sanctioned by the U.S. Treasury. The indictment against them said that KuCoin received more than US$3.2 million in cryptocurrency from Tornado Cash, a virtual currency mixer blacklisted in 2022 for dealing with cybercriminals and hostile state actors.

Two of Tornado Cash’s founders were similarly indicted in 2023 for allegedly laundering $1 billion for hackers linked to the Lazarus Group, a North Korean state-sponsored cyber theft organisation.

Gan and Tang remain at large. They both face one count of conspiring to violate the Bank Secrecy Act and one count of conspiring to operate an unlicensed money transmitting business, each of which carries a five year sentence.