New York State Attorney General Letitia James is suing KuCoin, alleging the exchange is an unregistered securities and commodities broker.
New York Attorney General Letitia James continues to crack down on unregistered cryptocurrency platforms, and the “defendant” this time is exchange KuCoin, according to a March 9 announcement.
New York sue KuCoin, expands cryptocurrency unfold https://t.co/aqHkBNiZWg pic.twitter.com/IWYliizj8i
— Reuters (@Reuters) March 9, 2023
The allegation states:
“One by one in the office is taking action against crypto companies that are flouting our laws and putting investors at risk. Today’s action is the office’s latest attempt to rein in crypto companies. KuCoin has not registered as a stock and commodity broker nor has it branded itself as an exchange. That’s why we must take strong action to hold them accountable and protect investors. “
James argued, the Office of the Attorney General (NYAG) was able to trade cryptocurrencies on Kucoin in New York, even though the company failed to fulfill its registration obligations with the NYAG, the United States Securities and Exchange Commission. Period (SEC) as well as the Asset Futures Trading Commission (CFTC). KuCoin also sells unregistered securities in the form of KuCoin Earn, the exchange’s lending and staking product.
The complaint also claims that Ethereum, the second largest coin in the crypto market, is an unregistered security. The petition reads, “ETH, like LUNA and UST, is a speculative asset based on the efforts of third-party developers to bring profits to ETH holders. Therefore, KuCoin is required to register before selling ETH, LUNA or UST.”
The lawsuit is also the first time the New York government has taken a stance on Ethereum. SEC Chairman Garry Gensler has repeatedly referred to ETH as a security, while the CFTC disagrees, asserting that the token is a commodity.
Not stopping there, James also accused Kucoin of disobeying a subpoena from her office from January 23. The NYAG expects the court to issue an order to “lock down” KuCoin’s New York business, block access to the website, and get back the funds it has earned from services in the state.
The attorney general’s office also wants KuCoin to provide the identities of those who participated in the purchase of securities or commodities on the exchange six years ago.
Currently, only Coinbase, Kraken, Bittrex and Bitfinex have completed the registration procedure with the state of New York.
Before Kucoin, the Attorney General’s Office has touched on many other crypto companies in the past. Recently, Letitia James made a similar allegation against CoinEx. The office also alleged fraud against former Celsius CEO Alex Mashinsky in January 2023 and issued a $45 million fine to Nexo at the same time.
The NYAG is also warning crypto investors and seeking information from victims affected by the crypto market crash at various points in 2022.
KuCoin is one of the largest cryptocurrency exchanges in the world, currently also unlicensed in the US and operating in over 200 countries. In 2022, the exchange was heavily fined by the Canadian regulator for violating securities laws here. The Dutch Central Bank also warned KuCoin to operate without a license in December 2022. Recently, the floor was also accused of violating the embargo law from the US.
As of the time of writing this article, Kucoin has not yet responded to the subpoena from NYAG. But the lawsuit is causing the crypto market to wobble this morning, March 10.