U.S. federal prosecutors have leveled charges against crypto exchange KuCoin and two of its founders for breaching anti-money laundering regulations.

The indictment, announced on Tuesday, accuses KuCoin of operating within the U.S. despite claiming otherwise to investors, failing to register with U.S. regulatory bodies, and neglecting to establish an anti-money laundering (AML) program.

According to the U.S. Department of Justice (DOJ), KuCoin, along with founders Chun Gan and Ke Tang, operated as a money-transmitting business serving over 30 million customers.

However, the exchange didn’t implement a know-your-customer (KYC) or AML program until 2023, and even then, the KYC measures didn’t apply retroactively to existing customers. Neither Gan nor Tang were arrested in connection with the charges.

The DOJ indictment highlighted KuCoin’s failure to register with the U.S. Financial Crimes Enforcement Network (FinCEN) as a money services business.

This lack of KYC and AML procedures allegedly enabled KuCoin to facilitate the laundering of proceeds from illicit activities, including sanctions violations and cybercrime schemes.

The Commodity Futures Trading Commission (CFTC) also filed a lawsuit against KuCoin, alleging the exchange didn’t register as required for offering futures trading services and failed to implement equivalent KYC measures mandated by the CFTC.

The CFTC is seeking various penalties, including monetary fines and trading bans, while the DOJ aims for forfeiture alongside criminal sanctions.

Homeland Security Investigations Special Agent Darren McCormack described KuCoin as “an alleged multibillion-dollar criminal conspiracy,” emphasizing its significance in the crypto landscape.

U.S. Attorney Damien Williams remarked on KuCoin’s attempts to conceal its substantial U.S. user base and highlighted the exchange’s substantial trading volumes.

KuCoin’s native token (KCS) witnessed a 5% decline following the announcement, reflecting market concerns over the charges.