Offshore crypto exchange settles with DoJ

According to court filings, between 2018 and early 2024, OKX served retail and institutional investors in the U.S., despite adopting an internal policy in 2017 against serving U.S. clients, and without registering as a money transmitting business under U.S. law — a step that requires compliance with AML requirements, including know-your-client (KYC) requirements.

During the period, the firm — which allowed users to trade hundreds of cryptocurrencies, and derivatives tied to crypto assets, such as bitcoin — processed over US$1 trillion worth of transactions, and generated hundreds of millions of dollars in fees, U.S. authorities alleged.

“[D]espite OKX’s official policy prohibiting U.S. persons from transacting on the exchange, OKX was fully aware that individuals in the United States could, and did, easily create and use OKX trading accounts,” the DoJ said.

It also alleged that, until early 2023, the exchange allowed existing accounts to transact without completing a KYC process; and, until early 2024, it also allowed customers to trade through “non-disclosure brokers” that don’t reveal any identifying information to OKX about the customers placing trades, it said.

“OKX also focused its efforts on attracting and retaining certain U.S. institutional customers, including large institutions who could provide liquidity and help OKX become one of the world’s largest cryptocurrency exchanges,” the DoJ said — adding that these clients, “provided significant liquidity, volume and trading fees for the platform, despite OKX’s knowing failure to register … and OKX’s ‘official’ policy banning U.S. customers.”

A review of third-party transaction data indicated that OKX was used for money laundering, “including more than US$5 billion of suspicious transactions,” the DoJ said.

As part of the plea deal, OKX agreed to forfeit US$420.3 million and to pay a US$84.4 million fine. It also agreed to retain a compliance consultant through 2027 to ensure it has adequate controls to guard against further violations.

In a statement, OKX said that, “In resolving the case, the company acknowledged that, as a result of legacy compliance gaps, certain U.S. customers had in the past traded on the company’s global platform.”

“There were no allegations of customer harm, no charges against any company employee and no government-appointed monitor as part of the settlement,” it said, adding that it voluntarily retained a compliance consultant to help beef up its compliance program.

“This settlement reflects growth and positions OKX to continue working with regulators and developing solutions that benefit our customers and the crypto market at large,” it said.

The DoJ noted that OKX received credit for cooperation and timely remediation, which resulted in a 25% discount on its potential fine.

In 2022, the Ontario Securities Commission reached a settlement with the exchange’s parent company, Aux Cayes Fintech Co. Ltd., which agreed to pay a $600,000 fine, to disgorge US$514,950 and to pay $25,000 in costs to resolve allegations that it violated securities laws by trading without registration and illegally distributing securities.