CFTC Charges KuCoin With Violations of Commodity Exchange Act

The Commodity Futures Trading Commission (CFTC) has filed a civil enforcement action against the entities that operate KuCoin, a centralized digital asset exchange.

The agency has charged KuCoin with operating an illegal digital asset derivatives exchange and committing multiple violations of the Commodity Exchange Act (CEA) and CFTC regulations, the CFTC said in a Tuesday (March 26) press release.

The action filed Tuesday charges Mek Global Limited, PhoenixFin PTE Ltd., Flashdot Limited and Peken Global Limited, according to the release.

In a Tuesday post on X, KuCoin said: “#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 respects the laws and regulations of various countries and strictly adheres to compliance standards.”

In the CFTC’s press release, the agency said that its complaint charges that from July 2019 to June 2023, KuCoin offered and executed commodity derivatives and leveraged, margined or financed commodity transactions involving people from the United States, without implementing the required know-your-customer (KYC) compliance procedures.

The complaint also charges that the exchange falsely claimed to have implemented KYC procedures and did not prevent U.S. customers from using the platform, according to the release.

The CFTC’s complaint further alleges that KuCoin allowed people who identified themselves as U.S. customers to participate in the exchange, and failed to impose IP address restrictions to prevent U.S. customers from accessing the exchange, per the release.

“For too long, some offshore crypto exchanges have followed a now-familiar playbook by offering derivative products and falsely claiming people in the United States cannot use their platforms, when in reality, anyone in the U.S. with commonly used technology can trade without providing basic customer identifying information,” Ian McGinley, director of enforcement at the CFTC, said in the release.

In December 2023, a U.S. district court approved the CFTC’s settlement with cryptocurrency exchange Binance and its former CEO, Changpeng Zhao.

That settlement imposed a $150 million civil monetary penalty personally against Zhao and required a $2.7 billion payment from Binance to the CFTC, half of which was a return of “ill-gotten” transaction fees and half was a penalty.