- The U.S. DOJ has slapped KuCoin with criminal charges.
- In response to the news, users have rushed to withdraw their assets, but the experience has been anything but routine.
- An expert suggests that the KuCoin case should come as no surprise.
Following the collapse of FTX in November 2022, U.S. authorities, including the Department of Justice (DOJ), have stepped up efforts to rein in the crypto industry, targeting not just criminal syndicates but also mixers and crypto exchanges.
Headline cases have included charges against Tornado Cash founders in August 2023 and the $4.3 billion settlement with Binance in November 2023 for breaking anti-money laundering rules. The latest firm to get the ax is the leading global exchange KuCoin. The unveiling of criminal charges against the exchange has led to a massive withdrawal panic, with investors left fearing the worst.
KuCoin Insolvency Fears Emerge
On Tuesday, March 26, the DOJ and the Office of Homeland Security Investigations (HSI) unveiled criminal charges against KuCoin and its founders, Chun Gan and Ke Tang. In a joint statement, authorities accused the exchange of offering services to U.S. customers since its launch in 2017 without obtaining a money transmitter license.
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The DOJ further accused the exchange of failing to maintain proper anti-money laundering controls, allowing the flow of an estimated $9 billion in illicit funds. Authorities stressed that the exchange did not implement Know Your Customer (KYC) requirements until July 2023, when it became aware of criminal investigations.
Following the news, several KuCoin users have rushed to take their assets off the exchange. For some of these users, however, this process has been anything but routine, with reported unusually lengthy withdrawal processing times only serving to stoke the flames of panic.
Defi Llama‘s CEX Transparency page shows that KuCoin has processed over $74 million in outflows in the past 24 hours.
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In the face of the DOJ lawsuit and the rush of withdrawals, KuCoin has moved to assure users of the safety of their assets, though it failed to explain reported withdrawal delays.
"KuCoin is operating well, and the assets of our users are absolutely safe. We are aware of the related reports and are currently investigating the details through our lawyers. KuCoin respect the laws and regulations of various countries and strictly adheres to compliance standards," the exchange wrote in a statement on X.
However, these statements have offered little succor to those still waiting on their pending withdrawals.
DailyCoin could not reach KuCoin for comments at the time of writing.
KuCoin’s Criminal Charges ‘No Surprise?’
Responding to the news of KuCoin’s indictment, prominent crypto lawyer and Variant Fund Chief Legal Officer Jake Chervinsky suggested that the charges “aren’t surprising” for those who have observed the trajectory of recent U.S. crypto enforcement efforts.
"The DOJ and CFTC cases against KuCoin aren't surprising to anyone who's followed US crypto enforcement in recent years. These follow NYAG's case last March, which KuCoin didn't bother to defend. The simple lesson: if you want access to the US market, you need to follow US law."
As highlighted by Chervinsky, in March 2023, KuCoin had been slapped with a lawsuit from the New York Attorney General (NYAG) for operating in the state without a license. The exchange settled these charges for $22 million in December 2023, promising to shut down operations in New York.
Before the NYAG or DOJ lawsuits, prominent crypto news reporter Colin Wu had shared data in May 2022 showing that KuCoin’s largest traffic came from the U.S.
On the Flipside
- The DOJ asserts that KuCoin’s founders are “at large.”
- The DOJ’s complaint does not mention insolvency.
- KuCoin faces separate civil charges from the CFTC.
Why This Matters
CoinGecko data ranks KuCoin as the fifth largest crypto exchange. The criminal charges in the U.S. now shroud the firm’s future in uncertainty.
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