The Commodity Futures Trading Commission (CFTC) announced today that it has filed an enforcement action in the US District Court for the Southern District of New York charging Mek Global Limited, PhoenixFin PTE Ltd., Flashdot Limited and Peken Global Limited, the which collectively operate a centralized digital asset exchange under the name KuCoin, in multiple violations of the Commodity Exchange Act (CEA) and CFTC regulations.
The complaint charges KuCoin with illegally trading in over-the-counter commodity futures and retail commodity trading with leverage, margining or financing. solicited and accepted orders for leveraged, margined, or financed commodity futures, swaps, and retail commodity transactions without registering with the CFTC as a futures commission dealer (FCM). failed to diligently supervise its FCM activities; operated a facility for trading or clearing swaps without being registered with the CFTC as a swap execution facility (SEF) or designated contract market (DCM); and failed to implement an effective customer identification program ( CIP).
In its ongoing lawsuit against KuCoin, the CFTC is seeking disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of CEA and CFTC regulations as alleged.
According to the complaint, KuCoin offered and executed commodity derivatives and leveraged, margined or funded commodity transactions to and for persons in the US from approximately July 2019 to approximately June 2023 and failed to implement required customer knowledge compliance (KYC). procedures. The complaint also alleges that although KuCoin claimed to have implemented KYC procedures, those procedures were fraudulent and did not prevent US clients from trading commodity interests and derivatives on the platform.
The complaint also alleges that individuals identifying themselves as U.S. customers were able to trade commodity futures, swaps and leveraged, margined or funded commodity transactions on the exchange in violation of CEA and CFTC regulations. KuCoin failed to enforce IP address restrictions during the relevant period to prevent US customers from trading commodity interests or consider commonly used technology such as Virtual Private Networks (VPNs) that could potentially circumvent the restrictions IP address.
In a separate criminal case, the US Attorney’s Office for the Southern District of New York filed an indictment against PhoenixFin PTE Ltd., Flashdot Limited and Peken Global Limited charging them with violating the Bank Secrecy Act, operating a relay business money without a license and conspiracy to violate the Bank Secrecy Act and operate as an unlicensed money transmitter business.