2025 Starts With A Bang for Crypto Fines & Investigations
As the greater developed world continues to be exposed to the allure of decentralized finance via cryptocurrencies, cyber-criminals have shifted their focus to using these payment forms for laundering ill-gotten funds. The international regulators and government agencies continue to crackdown on this space for this very reason, the first month of 2025 alone saw multiple legal cases come to a head with the potential to impact the entire sector moving forward.
France Initiates Probe into Binance’s Operations
The recently embattled crypto-trading giant Binance is in hot water once more. The world’s largest crypto exchange is now facing a criminal investigation organized by French authorities for failing to meet the country’s anti-money laundering standards. The economic and financial crime section of the Paris public prosecutor’s office (JUNALCO) officially opened a judicial probe into money laundering, tax fraud and other charges at Binance last week.1
The “king of crypto” was already hit hard in 2023 when their head, Changpeng Zhao, pled guilty in a Seattle federal court to violating money laundering rules. Under this plea deal, Zhao was forced to step down as CEO – in addition to serving a 4 month prison sentence – and Binance pay a hefty $4.3 billion fine. All the while, the firm continues to battle separate civil charges brought forth by the U.S. Securities and Exchange Commission (SEC) over mishandling of VIP client accounts after reportedly allowing high-profile clients to work around the company’s own terms of use for personal gain – often at the expense of other customers.
Now it’s France’s turn to drop the hammer. With Binance’s European hub located in France, the Paris prosecutor’s office is investigating the period from 2019 to 2023 to examine the scope of Binance’s anti-money laundering failures – the same time period that the aforementioned U.S. investigation keyed on. The French financial prosecutor is also accusing Binance of recruiting customers before its official registration was processed prior to 2022.
In response to the allegations, a Binance spokesperson stated that the company vehemently denies all allegations brought forth by French prosecutors, adding that they intend to fight any formal charges brought against them. Interestingly, they also added that the matter was several years old at this point and that they have made significant strides since then when it comes to compliance with current anti-money laundering regulations. This however further begs the question as to just how aware they were regarding their improprieties several years prior.
KuCoin Fined for Operating as Unlicensed Money Transmitter
Another large cryptocurrency exchange was also the subject of recent legal action. On January 27, Seychelles-based platform KuCoin pleaded guilty in Manhattan federal court to operating an unlicensed money transmitting business in the United States, and agreed to more than $297 million in fines and forfeiture. The platform, which provided spot and derivatives trading services to U.S. customers, was found to have lacked even basic know-your-customer processes, failed to file suspicious activity reports (SAR’s), and neglected to register with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and U.S. Commodity Futures Trading Commission (CFTC) as required by law. The formal breakdown of the penalty is $112.9 million for the criminal fine and $184.5 million in forfeiture. In addition, the plea deal requires that KuCoin has to leave the U.S. market for at least a two year period.
KuCoin’s founders also faced their own individual penalties as well. Chu Gan and Ke Tang both agreed to step down from their management/operation roles, enter two-year deferred prosecution agreements, and forfeit $2.7 million. Prosecutors’ reasoning for the individual penalties was based on the two co-founders being found personally responsible for negligence and being used as tools to facilitate suspicious transactions, transmit possible criminal proceeds from darknet markets and malware. All told, prosecutors alleged that inadequate anti-money laundering controls at KuCoin allowed them to receive more than $5 billion and send out more than $4 billion in illicit proceeds between 2017 and 2024.3
BitMEX Settles Over AML Failures
Last but not least, the U.S. Attorney’s Office of the Southern District of New York issued a press release on January 15th stating that they have fined cryptocurrency exchange BitMEX a whopping $100 million for willful violations of the Bank Secrecy Act (BSA), most notably failing to maintain an adequate anti-money-laundering and know-your-customer program. Because BitMEX has serviced and solicited business from U.S. traders, they are required by law to both register with the Commodity Futures Trading Commission (CFTC) and to establish an effective anti-money laundering program to circumvent financial crime. The U.S. Attorney’s Office found that BitMEX was well-aware of their requirements in this regard but decided to overlook their duties in spite of knowingly dealing with U.S.-based customers. In doing so, the exchange was able to boost its revenue stream while skirting the rules of performing proper due diligence on potential customers. In fact, prosecutors allege that the only key piece of information that BitMEX required from their domestic clientele was an email address to sign up with.
The U.S. Department of Justice also alleged that as part of BITMEX’s willful evasion of U.S. AML laws, the company lied to a bank about the purpose and nature of a subsidiary to allow BITMEX to pump millions of dollars through the U.S. financial system.2 Prosecutors and regulators alike have struggled to identify the extent of which these funds were of the illicit variety to date.
BitMEX’s three founders had already pleaded guilty to BSA violations in addition to criminal charges dating back to 2022, with each agreeing to pay their own $10 million fine. In 2024, the corporation itself pleaded guilty to these latest charges, with final sentencing and the associated fine coming about earlier this month.
In detailing these developments, Attorney for the United States Matthew Podolsky stated: “Anti-money laundering and know-your-customer rules protect Americans from fraud, combat money laundering, and prevent the financing of terrorist activity. It is critical that all financial institutions, including cryptocurrency exchanges, comply with these rules to protect our country’s economy and national security. Today’s sentence sends a clear message that companies that willfully violate these rules and refuse to implement AML/KYC programs will face consequences.”2
Citations
- Berwick, Angus. “French Investigators Open Fraud Probe against Crypto Platform Binance.” Reuters, 28 Jan. 2025.
- “Global Cryptocurrency Exchange BitMEX Fined $100 Million for Violating Bank Secrecy Act.” Southern District of New York, United States Department of Justice, 16 Jan. 2025.
Sun, Mengqi. “Kucoin to Pay Nearly $300 Million for Operating an Unlicensed Money Transmitter in the U.S.” The Wall Street Journal, 28 Jan. 2025.