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According to official statements from OKX, on February 25, 2025, OKX’s Seychelles-based subsidiary, Aux Cayes FinTech Co. Ltd., reached a settlement with the U.S. Department of Justice (DOJ), admitting to conducting remittance business in the U.S. without proper authorization. As part of the settlement agreement, the company agreed to pay an $84 million fine and forfeit approximately $421 million in revenue earned from U.S. customers during the period, most of which came from a small number of institutional clients.
Currently, all involved U.S. customers have been fully offboarded. In this settlement, the DOJ did not bring any charges regarding customer losses, did not charge any company employees, and did not appoint a government monitor. OKX has announced that it will strengthen its Know Your Customer (KYC) system, Customer Risk Rating (CRR) framework, and expand its Enhanced Due Diligence (EDD) program. It will also deploy industry-leading Anti-Money Laundering (AML) and sanctions tools. To support these efforts, OKX has established an on-chain investigation team comprising over 150 professionals.
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FinTax Commentary
1. Background of this Incident
Since 2018, OKX has been offering cryptocurrency spot and derivatives trading services to U.S. customers via OKX.com. Between 2018 and 2019, global cryptocurrency regulations remained in a gray area, with an underdeveloped regulatory framework. Compliance was generally not a priority for companies in the industry, and OKX was no exception. However, after 2019, as the cryptocurrency sector continued to grow, compliance risks became increasingly prominent. While OKX did begin exploring compliance infrastructure development and made some progress, it still fell short of meeting the stringent compliance requirements in the U.S.
Without obtaining any state-level remittance licenses in the U.S., OKX allowed approximately 32,000 American users to trade on its platform, involving transactions worth $4.21 billion. This attracted the attention of U.S. regulatory authorities. In 2022, the DOJ, the Department of Homeland Security (DHS), and the Commodity Futures Trading Commission (CFTC) launched a joint investigation into OKX. The investigation lasted three years and concluded with the settlement agreement, where OKX agreed to pay fines, forfeit illegal revenues, and implement compliance reforms.
2. Multiple Compliance Risks Identified
Although OKX has publicly stated since 2017 that it prohibits U.S. users from trading on its platform, the DOJ found that the company failed to take effective measures to enforce this ban. Key compliance issues identified in the investigation include:
Providing cryptocurrency trading services worth trillions of dollars to U.S. retail and institutional clients and generating hundreds of millions of dollars in fees.
Allowing U.S. users to bypass IP restrictions using VPNs to register accounts.
Employees advising customers to falsify their nationality (e.g., claiming to be from the UAE) to evade verification.
Sponsoring a U.S. film festival and promoting services through local marketing personnel.
Attracting major U.S. institutional clients to provide liquidity.
The Ministry of Justice considers that the above-mentioned acts are problematic in the following ways:
1**. Lack of Licensing and Regulatory Violations**
The DOJ accused OKX of operating an unlicensed money transmission business. Under U.S. law, financial institutions operating in the country must register with the Financial Crimes Enforcement Network (FinCEN) as a Money Services Business (MSB) and comply with relevant regulations. Despite being one of the world’s largest cryptocurrency exchanges, processing hundreds of billions of dollars in daily transactions, OKX did not obtain an MSB license. This led to a lack of regulatory oversight and non-compliance with AML and KYC requirements. Additionally, OKX failed to secure state-level remittance licenses, violating state-specific regulations on fund security and risk management.
2. Inadequate Anti-Money Laundering (AML) Monitoring
As of May 2023, OKX had not fully or consistently deployed commercial software to detect and report suspicious activities. It failed to conduct enhanced due diligence (EDD) for high-risk U.S. customers and lacked effective tracking of fund sources and transaction purposes. This created vulnerabilities that could be exploited for money laundering. As a result, OKX’s oversight failed to meet the core principles of the Bank Secrecy Act (BSA), indicating a breakdown in its AML mechanisms.
3. Flaws in Geofencing Technology
Due to delays in updating IP databases, algorithmic flaws, and other technical vulnerabilities, U.S. IP access was not effectively blocked. As a result, American users could still access OKX’s services in violation of regulations. The DOJ held OKX accountable for this regulatory failure, as these technological shortcomings contributed directly to systematic compliance breaches.
3. U.S. Cryptocurrency Regulatory Framework and Cases
3.1 Review of the Regulatory Framework
The United States employs a joint regulatory model for cryptocurrencies, with oversight shared by the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Financial Crimes Enforcement Network (FinCEN), along with state governments. This creates a multi-layered regulatory system that applies to different aspects of the crypto industry.
The SEC regulates the securities sector and derives its authority from the Securities Exchange Act of 1934. It applies the Howey Test to determine whether a cryptocurrency qualifies as a security. If classified as a security, the token issuer must register and disclose necessary information. Additionally, the SEC regulates cryptocurrency trading platforms, requiring them to register as national securities exchanges or alternative trading systems (ATS) to ensure investor protection and market transparency.
The CFTC, since 2015, has classified major cryptocurrencies such as Bitcoin as commodities and primarily focuses on fraud and market manipulation in the spot market. However, for futures, options, and swaps, the CFTC enforces strict regulations, requiring trading platforms to register as Designated Contract Markets (DCMs) or Swap Execution Facilities (SEFs) to ensure compliance with trading and clearing standards.
The FinCEN, responsible for anti-money laundering (AML) and counter-terrorist financing (CTF), defines cryptocurrency exchanges as Money Services Businesses (MSBs). As a result, exchanges must adhere to AML and Know Your Customer (KYC) requirements, including customer due diligence, transaction monitoring, suspicious activity reports (SARs), and currency transaction reports (CTRs). In 2020, FinCEN introduced the Travel Rule, mandating that exchanges collect and transmit sender and recipient information for transactions exceeding $3,000. This requirement aims to prevent illicit financial activities such as money laundering and terrorist financing.
In addition to federal regulations, individual U.S. states have also developed independent regulatory frameworks for cryptocurrencies. New York, for example, introduced BitLicense in 2015, the first comprehensive state-level regulatory framework for cryptocurrency businesses, requiring strict compliance with licensing, risk disclosure, and consumer protection rules. Other states, such as Washington and Wyoming, have also implemented regulatory measures to oversee virtual asset businesses.
In the case of OKX, the company was accused of operating an unlicensed money transmission business, primarily violating AML regulations by failing to obtain an MSB license before conducting financial transactions in the U.S. The DOJ’s approach suggests a preference for using traditional financial laws to enforce compliance in the crypto industry, allowing for a clear and enforceable legal basis to address cross-border regulatory violations.
Although OKX is headquartered in Seychelles, U.S. law mandates that any entity providing fiat exchange or asset transfer services to U.S. users must obtain an MSB license, regardless of its place of incorporation. This demonstrates the strict and far-reaching nature of U.S. financial regulations, which extend to foreign businesses engaging with American customers.
3.2 Related Case
| Case (Investigation Conclusion Date) | Violation | Regulatory Agencies | Penalty |
|---|---|---|---|
| BitMEX (2020) | Operating an unregistered futures trading platform, AML failure | U.S. Commodity Futures Trading Commission (CFTC), U.S. Department of Justice (DOJ) | $100 million fine, founders sentenced to 6-12 months in prison |
| Binance (2023) | Violations of sanctions laws, AML failure | U.S. Department of Justice (DOJ), Financial Crimes Enforcement Network (FinCEN), Office of Foreign Assets Control (OFAC), U.S. Securities and Exchange Commission (SEC) | $4.3 billion fine, CEO resigned, regulatory oversight imposed |
| Ripple (2023) | Unregistered securities issuance (XRP) | U.S. Securities and Exchange Commission (SEC) | Court ruled XRP is not a security, partial legal victory |
| OKX (2025) | Operating an unlicensed money transmission business, AML failure, technical compliance deficiencies | New York Department of Financial Services (NYDFS), U.S. Commodity Futures Trading Commission (CFTC) | Civil settlement: $84 million fine, $421 million in forfeited revenue |
Analyzing recent regulatory actions against cryptocurrency platforms in the U.S. reveals common risk factors for businesses operating in this space:
Lack of business licensing
Failure in AML compliance
Regulatory ambiguity and legal interpretation conflicts
Systemic non-compliance due to technological deficiencies
Violations of U.S. sanctions laws
From the penalty results, the United States has the most severe punishment for CoinSecurity, which systematically allowed users from sanctioned regions to access the platform for trading, violating the sanctions law and breaking the red line of international sanctions. The violations of OKX were mainly reflected in the unlicensed remittance and lack of technical control, which did not have a large impact on the stability of the financial market, and the penalties were relatively light. It can be seen that, according to the type of violation and its impact, the relevant U.S. regulatory measures set up a different penalty gradient.
4. Reflections on the Case
The OKX case underscores the ongoing struggle between cryptocurrency firms and regulators over compliance. From the perspective of cryptocurrency businesses, navigating compliance presents numerous challenges, particularly because blockchain technology inherently transcends national borders, making it difficult to fit within traditional territorial regulatory frameworks. Additionally, the overlapping nature of U.S. federal and state regulations further complicates compliance efforts.
Despite these challenges, OKX has made significant efforts to build a global compliance system in recent years. The company has invested in advanced geofencing technology, integrated multiple third-party compliance solutions, and strengthened its regulatory monitoring frameworks. These actions suggest that OKX was not actively resisting or evading regulations, but rather seeking an appropriate compliance strategy within an evolving legal landscape.
From a regulatory perspective, the application of traditional financial laws to cryptocurrency businesses is not always a perfect fit. OKX’s violations, while serious, do not indicate an intentional, prolonged effort to circumvent compliance, which raises the question of whether the $500 million settlement is excessively punitive. However, this case also highlights that U.S. regulations are stringent, and companies seeking to operate in the U.S. must fully comply with licensing, AML, and regulatory requirements to avoid severe legal and financial consequences. Although reaching a settlement was an economically practical resolution for both the DOJ and OKX, the best approach remains proactive compliance to prevent regulatory risks from arising in the first place.