Letitia James, the Attorney General of New York State, has initiated legal proceedings against KuCoin, a cryptocurrency exchange, on the grounds of not registering as a securities and commodities broker-dealer and for making false claims of being an exchange.
The lawsuit seeks to obtain a permanent injunction against the company, putting a stop to its unlawful activities, such as buying, selling, and offering securities and commodities within New York State, which goes against state laws.
In response to the news, the company’s legal team said:
At present, KuCoin has yet to receive any legal documents regarding this incident. KuCoin will continue to closely monitor the situation and will be addressing this matter through legal means if needed.
KuCoin Accused Of Martin Act Violations In Three Ways
The lawsuit alleges that KuCoin violated the Martin Act in three distinct ways. Firstly, KuCoin engaged in the sale, purchase, offer to sell, and offer to purchase cryptocurrencies that qualify as both commodities and securities. These sales had been conducted without being registered with the OAG as a commodity broker-dealer or a securities broker or dealer, thus violating New York law.
Among the cryptocurrencies sold to New Yorkers by it were Ether, LUNA, and TerraUSD. Secondly, the company issued and sold “KuCoin Earn,” a security that pooled investors’ cryptocurrencies to generate profits for both the company and investors, without registering as a securities broker or dealer, which was a violation of New York law.
Finally, it falsely represented itself as an “exchange” without appropriate registration or designation in contravention of New York law. As a result of operating in this manner, the company repeatedly and persistently engaged in illegal activity, violating both the New York Executive Law and the New York General Business Law.
The lawsuit also alleges that the company failed to comply with an OAG subpoena as part of its investigation into the cryptocurrency trading platform. Additionally, at least three foreign jurisdictions have taken adverse regulatory action against it, including the Financial Services Authority of the Republic of Seychelles, the Ontario Securities Commission, and the Dutch Central Bank.
However, the lawsuit seeks a summary grant of the relief sought in the Verified Petition, including a permanent injunction:
An order directing KuCoin to implement geo-blocking based on IP addresses and GPS location to prevent access to KuCoin’s mobile app, website, and services from New York, an accounting, restitution, disgorgement, and costs against KuCoin.
The allegations made against the company in the lawsuit are detailed and significant. It remains to be seen how it will respond to the lawsuit and what impact it will have on the cryptocurrency exchange industry.
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