Cryptocurrency exchange KuCoin pleaded guilty in Manhattan federal court on Monday, January 27, 2025, to operating as an unlicensed money-transmitting business in the U.S. The Seychelles-based company agreed to pay $300 million and to withdraw from the U.S. market for two years. U.S. users may still withdraw funds but are barred from trading on the platform.

Two Chinese co-founders, Chun “Michael” Gan and Ke “Eric” Tang, admitted to owning an unlicensed money-transmitting business. Each entered into a two-year deferred-prosecution agreement (DPA), agreed to forfeit $2.7 million, and each is barred from KuCoin leadership roles. The government’s willingness to allow the Gan and Tang to enter DPAs is unusual. Generally, DPAs are used for corporate defendants to avoid prosecution by complying with agreement terms.

KuCoin described the settlement as a milestone. Its new CEO, Chief Legal Officer B.C. Wong, aims to guide the company toward regulatory compliance and future innovation. “We anticipate this resolution will pave the way for clarity and closure,” a company spokeswoman said. KuCoin plans to seek proper U.S. licensing before re-entering the market.

Prosecutors’ Allegations and Penalties

Prosecutors accused KuCoin and its co-founders of conspiring to violate anti-money-laundering (AML) laws, including a failure to implement know-your-customer (KYC) processes and file suspicious activity reports. KuCoin also allegedly neglected to register with the Treasury Department’s Financial Crimes Enforcement Network and the Commodity Futures Trading Commission (CFTC). Prosecutors claimed KuCoin handled over $9 billion in illicit transactions between 2017 and 2024.  As part of the settlements, KuCoin and its co-founders denied conspiring to violate the Bank Secrecy Act.

Broader Implications

Despite optimism in the cryptocurrency industry that under President Trump the regulatory environment for the space may be more industry friendly, the KuCoin case may signal continuing regulatory scrutiny of cryptocurrency platforms. In December 2023, KuCoin paid $22 million to settle a New York Attorney General lawsuit, agreeing to cease operations in New York. The CFTC has also charged KuCoin for operating an unlicensed derivatives exchange, with negotiations ongoing.

Key Takeaways for Legal Practitioners:

  1. Continued Regulation in Cryptocurrency
    The case exemplifies enforcement of AML and KYC laws, highlighting risks for crypto exchanges and fintech companies. Lawyers advising clients in the cryptocurrency space should stress to clients the importance of implementing AML standards and KYC processes to minimize exposure and ensure digital asset compliance.
  2. Government Scrutiny of Licensing Violations
    Regulators appeared to continue aggressively targeting unlicensed foreign companies serving U.S. customers. The case sets a precedent for strict compliance requirements.
  3. Cross-Border Enforcement Challenges
    KuCoin’s case illustrates the complexities of multi-jurisdictional regulations, emphasizing the importance of global compliance strategies.
  4. Deferred Prosecution Agreements
    The use of DPAs in the KuCoin prosecution may signal a willingness by the government to consider alternative resolutions that penalize misconduct while avoiding more drastic and devastating consequences of criminal convictions. Defense lawyers advising clients facing comparable investigations or prosecutions are well advised to consider and reference the KuCoin DPAs to advance settlement discussions.
  5. Business and Reputational Risks
    KuCoin’s penalties, market exit, and reputational harm emphasize the cost of noncompliance. Proactive measures are critical for businesses seeking to avoid similar outcomes.

Conclusion
The KuCoin case may be indicative of a continuing efforts by the Justice Department on cryptocurrency enforcement. It serves as a cautionary tale for digital asset companies and an opportunity for lawyers to guide clients through evolving legal landscapes in fintech and crypto compliance.