The New York attorney general is once again gaining momentum in the cryptocurrency industry with a lawsuit accusing KuCoin, one of the world’s most popular Bitcoin exchanges, of operating unlicensed in the state.
New York attorney general sues Bitcoin exchange KuCoin
The state’s top law enforcement officer, Letitia James, said on Thursday that KuCoin, based in the island nation of Seychelles, failed to register as a broker-dealer of securities and commodities in New York and falsely identified itself as an exchange. The New York attorney general has sued KuCoin two weeks after it filed almost the same lawsuit against crypto platform CoinEx.
[DB] Crypto Exchange Kucoin Sued in New York’s Crackdown on Industry: BBG
— db (@tier10k) March 9, 2023
As we reported on cryptocoin.com, New York Attorney General Letitia James continued her efforts to put pressure on unregistered cryptocurrency platforms by filing a lawsuit against KuCoin. The Office of the Attorney General (OAG) claims that it buys and sells cryptocurrencies in New York via KuCoin, although the company is not registered in the state. With this enforcement action, Attorney General James aims to stop KuCoin from operating in New York and block access to the website until it complies with the law. Today’s action is the latest in Attorney General James’ efforts to rein in cryptocurrency platforms.
KuCoin is a virtual currency trading platform that allows traders to buy and sell cryptocurrency through its website and app. KuCoin investors can buy and sell popular virtual currencies on its platform, including securities and commodities such as ETH, LUNA, and TerraUSD (UST). This action is one of the first cases where a regulator has claimed that ETH, one of the largest cryptocurrencies available, is a security in court. The petition argues that ETH, just like LUNA and UST, is a speculative asset that relies on the efforts of third-party developers to generate profits for ETH holders. Therefore, KuCoin needed to register before selling ETH, LUNA or UST.
Attorney General requests KuCoin to be blocked
The allegations include that KuCoin also sells unregistered securities in the form of KuCoin Earn, a lending and staking product. New York law requires securities and commodities brokers to register with the government, but the Bitcoin exchange failed to do so. Using a computer with a New York-based IP address, OAG was able to create an account with KuCoin and buy and sell digital tokens for which KuCoin charges a fee. OAG was also able to deposit digital tokens into the KuCoin Earnings product, for which KuCoin also charges a fee.
Additionally, KuCoin claims to be an exchange, but is not registered with the Securities and Exchange Commission as a national stock exchange or properly designated by the Commodity Futures Trading Commission under New York Law. KuCoin also failed to comply with a subpoena issued by the OAG to provide further information on digital asset trading activities in the state. KuCoin was found to operate in multiple jurisdictions, including Seychelles, Canada, and the Netherlands, without the proper license.
Through his lawsuit, Attorney General James seeks a court order barring the company from operating in New York, due to KuCoin’s misrepresentation that it is an exchange. It also requests geo-blocking KuCoin based on IP addresses and GPS location to block access to KuCoin’s mobile app, website and services from New York.
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