Cryptocurrency exchange admits to breaching anti-money laundering regulations

The Exchange agreed to pay over USD504m for violating U.S. anti-money laundering laws and facilitating over USD5 billion in suspicious transactions. The Exchange agreed to criminally forfeit USD420.3m and pay a fine of approximately USD84.4m. The Exchange pled guilty to one count of operating an unlicensed money transmitting business, in violation of Section 1960 of Title 18 of the United States Code.

Federal law requires that all financial institutions operating wholly or in substantial parts within the U.S. register with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) as a money services business (“MSB”) and comply with federal anti-money-laundering (“AML”) laws and the Bank Secrecy Act. U.S. v. Aux Cayes Fintech Co. Ltd., d/b/a “OKEx,” d/b/a “OKX”, No. 25-cr-00069-KPF (S.D.N.Y. Feb. 24, 2025). AML laws require all MSBs to file suspicious activity reports and maintain an adequate AML program to ensure that MSBs are not used as vessels for criminal activity. Effective AML programs include written procedures to, among other things, verify customer identification; designate a person with day-to-day compliance responsibility; provide training and education for the appropriate personnel with responsibilities under the AML program; and provide for independent review to monitor and maintain an adequate program. 31 C.F.R. § 1022.210.

According to the SDNY, the Exchange, one of the largest cryptocurrency exchanges in the world, has been operating since 2017 and allowing registered users to place orders for spot trades in over three hundred cryptocurrencies. According to the SDNY, while the Exchange had a policy that prevented U.S. users from transacting on its platform, it simultaneously sought out U.S. customers, including customers in the Southern District of New York.

Specifically, according to a Statement of Facts attached to the plea agreement, from approximately December 2017 through November 2022, the Exchange knew that U.S. customers were creating trading accounts in violation of its policy preventing U.S. persons from using the exchange platform. Additionally, the Exchange allowed the use of VPN technology to be used to bypass its block on IP addresses located in the U.S., while also allowing for users to decline to identify themselves or their country. 

Until early 2024, the Exchange allowed for users to place trades through other third-party entities, without the third-party disclosing any identifying information about the users on whose behalf the trades were placed. Aux Cayes, No. 25-cr-00069-KPF (S.D.N.Y. Feb. 24, 2025). 

DOJ’s press release set forth examples of the Exchange promoting in the U.S., including allowing an existing U.S. customer to promote the exchange platform by providing prospective users with a publicly available instructional video on how to conceal their U.S. location to use the platform. According to the Statement of Facts, one of the Exchange’s largest customers (located in the U.S.) conducted over a trillion dollars in transactions between 2019 and 2023. Further, according to the Statement of Facts, even after it required all customers to go through the KYC process, certain of the Exchange’s employees advised some customers as to how to circumvent the KYC process and the policy prohibiting U.S. customers from trading on the platform.

The plea agreement also provides that a consultant retained by the Exchange will conduct two annual reviews of the existing compliance programs and policies to prevent U.S. users from utilizing the exchange. The SDNY indicated that it had given the Exchange partial cooperation credit for its efforts facing the SDNY and took notice of some remediation efforts the Exchange had undertaken, in coming to the agreement.

The guilty plea comes at a time of a reset by the U.S. government with respect to the digital assets sector, and as companies in the sector such as Coinbase Global Inc., Uniswap, Gemini, and Robinhood have announced the voluntary dismissal or close of investigations against them by the U.S. Securities and Exchange Commission. Market participants are encouraged to closely monitor developments in this area as the new administration reshapes crypto policy.

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