KuCoin, a major global cryptocurrency exchange, has agreed to pay $22 million and cease operations in New York to settle a lawsuit from the state last year, alleging violations of state laws.
New York Attorney General Letitia James filed a lawsuit in the Supreme Court against the Seychelles-based crypto exchange in March 2022. James accused KuCoin of facilitating the buying and selling of cryptocurrencies deemed securities or commodities under New York law without holding the required licenses.
The suit further charged KuCoin with falsely representing itself as an “exchange” without registering as such with the state. KuCoin has acknowledged these allegations.
Under the terms of the agreement, KuCoin will pay $5.3 million to the state and reimburse approximately $16.7 million in cryptocurrency to 177,800 New York investors. To return the funds to affected New Yorkers, KuCoin will facilitate withdrawals and transfer the remaining balances to a third-party administrator for distribution.
The exchange will shut down all accounts for New York residents within 120 days and block future account creation for these users. It will also limit withdrawal access for 30 days, allowing 90 days for users to withdraw their funds.
“Crypto companies should understand that they must play by the same rules as other financial institutions,” James said in a statement on Tuesday.
KuCoin CEO Johnny Lyu disclosed the settlement on the social media platform X (formerly known as Twitter). He reassured users about the security of their assets throughout the account-blocking procedure.
“Rest assured – your asset security is always guaranteed and remains our top priority during this process,” Lyu said.
In terms of traffic, liquidity and trading volumes, KuCoin trails behind giants like Binance, Coinbase and Kraken, according to data analysis by CoinMarketCap. However, it still boasts over $1 billion in daily trading volume with over 2 million weekly visitors to its website.
The exchange has also faced regulatory scrutiny in other countries. Last year, South Korea’s Financial Intelligence Unit (FIU) investigated 16 overseas crypto exchanges, including KuCoin, for allegedly operating without proper licenses.
As the exchange failed to comply with the country’s Financial Information Act, the FIU requested the Korea Communications Commission block access to KuCoin’s website and mobile app.
🚨 NEWS: KuCoin to leave 🇺🇸 New York and pay a $22 million settlement for violating securities laws.
— BlockNews.com (@blocknewsdotcom) December 12, 2023
Crypto crackdown in New York
The settlement between KuCoin and the state reflects the tightening grip of U.S. regulators and law enforcement seeking to address concerns about fraud, money laundering and inadequate investor protection within the crypto space.
New York continues to lead the charge in crypto regulation. Last month, the state’s Department of Financial Services issued enhanced guidance aimed at strengthening how firms list and delist crypto assets on their platforms.
KuCoin isn’t the first crypto firm to face scrutiny from New York regulators. Back in 2021, after a two-year investigation, crypto exchange Bitfinex and Tether settled with Attorney General James’ office for $18.5 million. The attorney general accused Tether of failing to fully back its stablecoin with USD held in a bank account.
The attorney general office continued the crackdown and secured a $1.8 million settlement with Hong Kong-based CoinEx in June 2023. The exchange was found to have operated illegally within the state without proper registration.
In October, the office filed a lawsuit against Genesis Global, its parent company Digital Currency Group (DCG) and Gemini. The suit alleges the firms defrauded investors out of over $1 billion through a joint investment program called Gemini Earn, a claim DCG vehemently denies. The lawsuit aimed to bar all three cryptocurrency firms from operating within New York’s financial investment industry.
Then, November saw FTX founder Sam Bankman-Fried’s conviction on federal charges of defrauding customers of billions of dollars. Meanwhile, Binance founder Changpeng Zhao pleaded guilty to violating U.S. anti-money laundering laws.
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