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Tuesday, May 30, 2023
Mugglehead Magazine
Alternative investment news based in Vancouver, B.C.


New York Attorney General takes aim at unregulated cryptocurrency exchange KuCoin

New York State joins Canada, the Seychelles and the Netherlands, in finding the exchange to be operating without proper licensing

New York Attorney General takes aim at unregulated exchange KuCoin
New York Attorney General Letitia James. Image via New York Attorney General's Office

New York Attorney General Letitia James filed a lawsuit against two cryptocurrency firms, alleging the platform violated regulations and falsely represented itself as an exchange.

Early March, the Attorney General announced the lawsuit against the firms Mek Global Limited and Phoenixfin PTE Ltd. which were collectively doing business as KuCoin.The lawsuit mentions how the platform didn’t register as a commodity or securities broker-dealer and violated the Martin Act which is a law that empowers the New York State Attorney General to investigate and prosecute securities fraud.

The complaint alleges KuCoin violated the Martin Act in three ways. First, it allowed the sale, offering, and purchase of cryptocurrencies that qualify as commodities and securities without without proper registration as a commodity or securities broker. Second, the platform issued and sold a project called “KuCoin Earn,” which the AG alleges is a security, without first registering as a securities broker or dealer.

“One by one my office is taking action against cryptocurrency companies that are brazenly disregarding our laws and putting investors at risk,” said Attorney General James.

“Today’s action is the latest in our efforts to rein in shadowy cryptocurrency companies and bring order to the industry.”

The Martin Act empowers the New York State Attorney General to investigate and prosecute securities fraud, including the sale of securities through misrepresentation or omission of facts. The law also allows the Attorney General to subpoena documents and testimony from individuals and companies, without a court order.

Read more: Joint European task force takes down darkweb money laundering platform ChipMixer

Read more: U.S. Treasury latest budget proposal poses 30% tax on cryptocurrency mining

Attorney General James has a history of going after unregulated crypto

The Office of the Attorney General (OAG) bought and sold cryptocurrencies on KuCoin in New York even though the company was not registered in the state. Through this enforcement action, James seeks to stop KuCoin from operating in New York and block access to its website until its in compliance with the law.

The state also intends on permanently keeping KuCoin from selling or buying securities and commodities to and from New Yorkers. Also, it wishes to implement geo-blocking technology to restrict New Yorkers from accessing its website and mobile app.

In addition, the state is seeking restitution and requests the court to compel KuCoin to provide an accounting to facilitate these payments.

Singapore-based KuCoin launched in 2017 and quickly became one of the world’s most popular cryptocurrency exchanges. It provides users with access to over 300 digital assets, including ETH, LUNA, and UST. It also offers secure storage for user funds and provides a variety of features, including margin trading.

KuCoin also gives users access to its own token, KCS, which is used to pay for services on the platform.

This action represents one of the first times a regulator has claimed in court that Ethereum (ETH) is a security. The petition argues that ETH, like LUNA and UST, is a speculative asset reliant on the efforts of third-party developers.

SEC doesn’t recognize KuCoin either

Also, the Securities and Exchange Commission (SEC) has not registered KuCoin as a national securities exchange. Nor is it registered with the Commodity Futures Trading Commission as required under New York law. KuCoin also failed to comply with a subpoena issued by OAG to provide information regarding its digital asset trading activities.

Multiple jurisdictions have already found the exchange to be operating without proper licenses. These include the Seychelles, Canada and the Netherlands.

This is the latest in Attorney General James’ attempts to enforce New York laws on the cryptocurrency industry. Last month, Attorney General James brought action against CoinEx for failing to register as a securities and commodities broker.

In January, Attorney General James joined a multi-state coalition to recover $24 million from cryptocurrency platform Nexo for operating illegally. She also sued the former CEO of collapsed cryptocurrency exchange Celsius for defrauding investors and concealing the company’s financial condition.


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