KuCoin claims user assets are unaffected by the US SDNY lawsuit.

Cryptocurrency exchange KuCoin says its users' assets are safe amid a series of criminal and civil charges filed by the United States Attorney for the Southern District of New York (SDNI) and the Commodity Futures Trading Commission (CFTC) on March 26.

“KuCoin is working well, and our users' assets are perfectly safe,” the exchange wrote. “We are aware of the relevant reports and are investigating the details through our lawyers. KuCoin respects the laws and regulations of various countries and strictly adheres to compliance standards. A few hours later, the exchange posted another tweet, seemingly displeased with the novel allegations on March 26:

“You mean KuCoin? That's where I got my 100x CryptoGems.”

At the same time, KuCoin's native token, KuCoin Token (KCS), has lost 12% of its value in the last 24 hours and is currently trading at $12.64 at press time. Earlier, the SDNY announced criminal charges against KuCoin co-founders Chun Gan and Ke Tang. The two defendants were charged with conspiracy to conduct an unauthorized money transmitter business and “conspiracy to violate the Bank Secrecy Act by willfully failing to maintain an adequate anti-money laundering (‘AML') program.”

According to prosecutors, despite significant operations in the US, KuCoin is not registered with the CFTC or the Financial Crimes Enforcement Network as a legitimate money transmitter. In addition, despite allegedly complying with US regulations, the exchange onboarded US users without prior approval, and in 2018 they accounted for more than 18% of the exchange's user base.

“Since its inception in 2017, KuCoin has received more than $5 billion, and sent more than $4 billion of suspicious and criminal proceeds,” prosecutors wrote. “In other words, KuCoin's no-KYC policy was critical to its growth and success.”

According to a parallel CFTC complaint, KuCoin “offered commodity derivatives and executed, distributed or funded commodity transactions in the US from July 2019 through June 2023, and failed to comply with required Know Your Customer (KYC) procedures.” The CFTC alleged that during this period, KuCoin did not provide any IP verification procedures to deny access to US users.

Both criminal and civil proceedings are ongoing, and co-founders Chun Gan and Ke Tang are still in custody. Despite the complaints, both prosecutors and regulators have alleged that KuCoin mismanaged users' assets.

Related: KuCoin Responds to Locked User Fund Claims