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The office of the NYAG recently filed a lawsuit against crypto exchange KuCoin for “disregarding our laws and putting investors at risk.”
New York Attorney General (NYAG) Letitia James has sued KuCoin (KCS) as part of a broader crackdown against digital currencies. On Wednesday, the NYAG’s office filed a lawsuit against the crypto exchange for allegedly violating securities and commodities laws in New York. The NYAG now seeks to block access to KuCoin in the state.
James’ petition read:
“One by one, my office is taking action against cryptocurrency companies that are brazenly disregarding our laws and putting investors at risk. Today’s action is the latest in our efforts to rein in shadowy cryptocurrency companies and bring order to the industry. All New Yorkers and all companies operating in New York have to follow our state’s laws and regulations.”
In addition, the Democrat lawyer and politician also explained in the filing:
“KuCoin operated in New York without registration, and that is why we are taking strong action to hold them accountable and protect investors.”
Despite disapproving KuCoin, Attorney General James claimed that Terra (LUNA), TerraUSD (UST), and Ether (ETH) are securities. Her stance on the listed digital currencies aligns with a previous similar position taken by the Securities and Exchange Commission (SEC).
The petition read:
“ETH, just like LUNA and UST, is a speculative asset that relies on the efforts of third-party developers to provide profit to the holders of ETH.”
As a result, KuCoin was also required to register before selling LUNA, UST, or ETH.
NYAG Alleges KuCoin False Representation
The NYAG lawsuit stated that KuCoin falsely represented itself as a crypto exchange. According to the petition, the crypto exchange operates more like a securities and commodities broker-dealer. By forcing KuCoin to geo-fence its website, considering IP addresses and GPS location, the NYAG seeks to block company access.
The timing of the NYAG lawsuit is peculiar due to the attention regulators have given to staking services lately. For instance, the SEC fined leading exchange Kraken $30 million for allegedly violating securities laws with its staking product. Meanwhile, SEC Chair Gary Gensler previously suggested that the regulatory agency could sanction Ether. According to Gensler, BTC is the only digital currency the SEC considers a non-security.
Attorney General James’ move is the latest crackdown effort on the crypto industry, particularly in New York. The state has some of the strictest crypto laws in the US. For example, New York State authorities sued crypto exchange CoinEx last month for failure to register as a securities and commodities broker-dealer.
KuCoin once claimed to be the “most advanced and secure cryptocurrency exchange” before falling victim to a $150 million hack in 2020. However, the Seychelles-based exchange still ranks high (5th position) on CoinGecko’s list of exchanges based on “trust score.” It is also the 12th largest crypto exchange based on 24-hour trading volume.
As a virtual currency trading platform, KuCoin lets investors buy and sell crypto via its website and app. In addition to ETH, LUNA, and UST, the exchange also sells unregistered securities, such as its lending and staking product, KuCoin Earn.