CFTC Accuses KuCoin of Breaching Commodity Exchange Act Regulations

A legal proceeding has been initiated by the

Commodity Futures Trading Commission

(CFTC) targeting the operators of the

KuCoin

platform, known for its centralized cryptocurrency trading services.

KuCoin faces accusations from the regulatory body for running an unregistered digital asset derivatives exchange and for multiple infringements of the Commodity Exchange Act (CEA) and regulations set by the CFTC, as stated in their

public announcement

on Tuesday (March 26).

The entities Mek Global Limited, PhoenixFin PTE Ltd., Flashdot Limited, and Peken Global Limited are the subjects of the complaint filed, as per the announcement.

Following the lawsuit revelation, KuCoin communicated through a

social media post

on X: “#KuCoin maintains normal operations, ensuring our users’ assets are fully secured. We have taken note of the relevant reports and are presently reviewing the specifics through our legal team. KuCoin maintains a strong commitment to legal compliance and adheres to mandated standards.”

The CFTC claims in their lawsuit that from July 2019 to June 2023, KuCoin conducted and settled trades in commodity derivatives and managed leveraged or financed transactions with commodities for individuals in the United States without adopting mandatory KYC processes.

Moreover, the lawsuit suggests that KuCoin made misleading statements claiming the enforcement of KYC measures and failed to prevent U.S.-based consumers from accessing their services, according to the details in the announcement.

Furthermore, the exchange is said to have permitted U.S. customers to trade on its platform without implementing measures to block them, such as IP address restrictions, as put forth in the announcement.

Ian McGinley, Director of Enforcement at the CFTC, pointed out in the announcement that certain offshore crypto trading platforms have repeatedly allowed derivative trading under false pretenses of being unreachable by U.S. citizens, despite the fact that anyone in the U.S. with basic technology can trade anonymously.

In a previous legal development in December 2023, a U.S. district court ruled in favor of the CFTC’s settlement with the cryptocurrency trading venue

Binance

and its erstwhile CEO,

Changpeng Zhao

. This resolution includes a substantial financial penalty of $150 million imposed on Zhao personally, and mandates a compensatory payment of $2.7 billion by Binance to the CFTC, splitting equally between reimbursement of disputed transaction fees and a punitive sanction.