New York sues KuCoin as US intensifies crackdown on crypto companies

New York’s attorney general Letitia James on Thursday sued KuCoin for failing to register with the state before allowing investors to buy and sell cryptocurrencies on its platform. The move is part of the state’s effort to rein in what she calls “shadowy” cryptocurrency companies as the state continues its crackdown on unregistered cryptocurrency platforms.

Attorney General James said added that KuCoin violated the Martin Act, an important state securities law, by transacting in cryptocurrencies, selling the product “KuCoin Earn” to generate income for itself and investors, and wrongfully calling itself an “exchange.”

The announcement comes just a month after she sued the CoinEx cryptocurrency platform for failing to register with the state. In a statement, James said:

“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. KuCoin operated in New York without registration and that is why we are taking strong action to hold them accountable and protect investors.”

In a lawsuit filed against KuCoin with the New York state court in Manhattan, James said the crypto exchange failed to “register as a securities and commodities broker-dealer and falsely representing itself as an exchange.” She is seeking a permanent injunction to stop KuCoin from operating in New York until it complies with the law.

KuCoin has not immediately responded to requests for comment.

We’ve been covering KuCoin for some time on our platform. KuCoin is a virtual currency trading platform and the fourth-largest cryptocurrency exchange. It was founded in 2013 by a group of blockchain enthusiasts who had proved themselves in industry giants like Ant Financial and GF Securities. KuCoin hits a unicorn valuation of $10 billion after raising $150M in Series B funding.

Through its platform, KuCoin enables investors to buy and sell cryptocurrency through its website and app. According to The Office of the Attorney General (OAG) of New York, KuCoin also allows “investors can buy and sell popular virtual currencies, including ETH, LUNA, and TerraUSD (UST), which are securities and commodities.”

“This action is one of the first times a regulator is claiming in court that ETH, one of the largest cryptocurrencies available, is a security. The petition argues that ETH, just like LUNA and UST, is a speculative asset that relies on the efforts of third-party developers in order to provide profit to the holders of ETH. Because of that, KuCoin was required to register before selling ETH, LUNA, or UST,” OAG said.