Erik Larson
New York Attorney General Letitia James is taking another swing at the cryptocurrency industry with a lawsuit accusing , one of the world’s most popular crypto-exchanges, of operating in the state without a license.
KuCoin, based in the island nation of Seychelles, failed to register as a securities and commodities broker-dealer in New York and falsely represents itself as an exchange, according to the lawsuit filed Thursday in state court.
The suit comes two weeks after James filed a nearly identical complaint against crypto platform . Another suit against crypto companies Nexo Inc. and Nexo Capital Inc. resulted in a settlement in January of up to $24 million for New York and nine other states.
“One by one, my office is taking action against cryptocurrency companies that are brazenly disregarding our laws and putting investors at risk,” James said in a statement. “Today’s action is the latest in our efforts to rein in shadowy cryptocurrency companies and bring order to the industry.”
KuCoin’s lawyers couldn’t immediately be identified. Johnny Lyu, chief executive officer at KuCoin, didn’t immediately respond to a message seeking comment.
State and federal regulators, including the US Securities and Exchange Commission, have been increasing scrutiny of crypto companies following the collapse of ’s trading platform and the resulting industry meltdown. Just this week, crypto-friendly lender Silvergate Capital Corp. said it plans to liquidate after the turmoil sapped its financial strength.
Earlier Crypto Suits
James last year former Celsius Network Ltd. Chief Executive Officer Alex Mashinsky for allegedly duping investors out of billions of dollars by lying about the safety of his once high-flying crypto lender. New York also got $1 million in a settlement with BlockFi Lending LLC over the offering of unregistered securities — part of a wider deal with the SEC and state regulators totaling $100 million
KuCoin was the fourth-largest crypto exchange for spot trading, with more than $500 million in digital assets changing hands in a 24-hour period as of Wednesday, according to data compiled by CoinMarketCap.com. It’s also the fourth-largest derivatives exchange, with $1.7 billion in trading volume over the same period, the data show.
James alleges KUCOIN cannot legitimately claim to be an exchange because it isn’t registered with the SEC or properly designated by the Commodity Futures Trading Commission as required under New York law. James said the suit is among the first in which a state regulator is claiming in court that Ether, one of the largest cryptocurrencies, is a security.
James has taken an increasingly aggressive stance toward the industry since at least 2021, when she won a court order shuttering the virtual currency trading platform Coinseed for investors out of millions of dollars across the US, and struck a deal requiring Bitfinex and Tether to cease trading in the state for overstating their reserves and hiding almost $850 million in global losses. That same year James issued two consumer alerts about what she described as the “extreme risks” of investing in cryptocurrencies and urging “extreme caution” when doing so.
The Ontario Securities Commission secured a multi-million judgment against KuCoin’s operators in June 2022 for operating without a license. In December, the Central Bank of the Netherlands issued a warning to investors about the exchange.
— With assistance by Dave Liedtka
