KuCoin, a crypto exchange, has recently announced the shutdown of its operations in New York following an agreement with the Supreme Court of the State of New York County. As part of the settlement, KuCoin will pay a $5.3 million fine to the Attorney General’s Office of the county.
The legal proceedings against KuCoin began in March 2023 when the Office of the Attorney General filed legal petitions alleging violations of the Martin Act. The exchange was accused of falsely portraying itself as an exchange on its website without proper clearance from authorities. KuCoin is now required to close all customer accounts and return funds within a 120-day period or face legal consequences.
KuCoin’s CEO, Johnny Lyu, stated that the agreement with the New York Attorney General’s office aligns with the company’s commitment to regulatory compliance. This resolution stems from an ongoing effort by New York authorities to exert greater control over businesses operating within the digital asset sphere.
KuCoin allegedly operated in NY without the requisite registration
The lawsuit against KuCoin, headquartered in the Seychelles, was instigated in March by Attorney General Letitia James, who alleged that the exchange had been operating within the state without the requisite registration —a mandatory condition for platforms facilitating cryptocurrency trading.
As part of the settlement, KuCoin has committed to ceasing its trading of securities and commodities within New York, aligning with the increasing scrutiny cryptocurrency platforms face from U.S. regulatory bodies and law enforcement agencies. The focus of this heightened vigilance includes addressing concerns related to fraud, money laundering, and the necessity for enhanced investor protections within the crypto sector.
In a statement, Attorney General James emphasized that cryptocurrency companies must adhere to the same regulatory standards as traditional financial institutions. She argued that KuCoin had violated the Martin Act, a significant New York state securities law, by engaging in cryptocurrency transactions, such as the sale of “KuCoin Earn” products, designed to generate revenue for both the platform and its investors. Moreover, James highlighted that this legal action represents one of the initial instances where Ethereum (ETH) has been classified as a security, further underscoring the evolving regulatory landscape of the cryptocurrency market.