DOJ reaches $500 million settlement with OKX affiliate over unlicensed money transmitting business

The U.S. Department of Justice said it has reached a settlement with Aux Cayes FinTech Co. Ltd., an affiliate of crypto exchange OKX, under which the company will pay over $500 million, including $84 million in penalties and approximately $421 million in forfeited fees earned from U.S. customers.

The investigation involved not securing the proper license to do business as a money transmitter, according to a statement released on Monday by OKX. The exchange also said that the U.S. customers involved are no longer on the platform and that there were no customer harm-related allegations. 

According to the statement, the exchange also agreed to forfeit fees earned by the U.S. customers, which amount to about $421 million. 

"In recognition of these gaps, the Company, on its own initiative, voluntarily retained a compliance consultant to help remedy the issues and enhance its overall compliance program, and plans to continue with this consultant into the future," the firm said. 

FBI Assistant Director in Charge James E. Dennehy accused OKX of "flagrantly" violating U.S. laws and told people to give false information to avoid necessary procedures.

"Furthermore, in their failure to adhere to U.S. law, significant illicit transactions which furthered other criminal activity went undetected on their platform," Dennehy said in a statement. 

'Just put a random country'

OKX has had a policy since 2017 that prevented people in the U.S. from transacting on its exchange, but the DOJ said OKX pursued customers in the U.S. 

The firm later began requiring all customers to provide know-your-customer information to begin trading, but the DOJ said an OKX employee told those customers to provide false information. 

“'I know you’re in the US, but you could just put a random country and it should go through. You just need to put Name, nationality, and ID number. You could just put United Arab Emirates and random numbers for the ID number,'" the DOJ said in an example. 

The firm also did advertising in the U.S. and sponsored the Tribeca Film Festival. There OKX allowed customers to promote the exchange and at least one customer provided an instructional video on how U.S. customers can register with OKX while using a VPN to hide that they were in the U.S., the DOJ said.

Update: Feb. 25, 13:20 UTC: Clarified that the DOJ claimed only one employee provided false information.