As reported by FinTelegram, the U.S. Department of Justice (DOJ) has filed an indictment against the crypto exchange KuCoin and its Chinese founders, Chun Gan and Ke Tang. In a parallel action, the Commodity Futures Trading Commission (CFTC) has initiated a civil enforcement action against the crypto exchange and its operating entities Mek Global Limited, PhoenixFin PTE Ltd, Flashdot Limited, and Peken Global Limited.
According to the CFTC Compliant, Mek Global Limited, PhoenixFin PTE Ltd, Flashdot Limited, and Peken Global Limited are operating collectively the KuCoin crypto exchange, which engaged in off-exchange commodity futures transactions and other related regulatory infringements without proper registration with the CFTC.
The enforcement action accuses KuCoin of offering and conducting leveraged, margined, or financed retail commodity transactions, as well as dealing in commodity futures and swaps, without the requisite CFTC registration as a futures commission merchant (FCM). Furthermore, the complaint alleges failures in supervising FCM activities, operating a facility for the trading or processing of swaps without CFTC registration, and neglecting to implement an effective customer identification program (CIP).
The CFTC’s litigation aims to secure disgorgement, civil monetary penalties, and permanent trading and registration bans against KuCoin, in addition to a permanent injunction to prevent future violations.
The case sheds light on the broader issue of offshore crypto exchanges operating in the U.S. without compliance with regulatory standards, including know-your-customer (KYC) procedures. Despite KuCoin‘s claims of implementing KYC measures, the CFTC’s complaint suggests these were ineffectual, allowing U.S. customers to engage in commodity interests and derivatives trading on the platform. The absence of IP address restrictions or measures to counter the use of technology such as virtual private networks (VPNs) further exacerbated these regulatory breaches.
In a related criminal action, the U.S. Attorney’s Office for the Southern District of New York against PhoenixFin PTE Ltd, Flashdot Limited, and Peken Global Limited charges them with violations of the Bank Secrecy Act, operating an unlicensed money transmitter business, and conspiracy related charges.
