Attorney General James Secures More Than $22 Million from Cryptocurrency Platform for Operating Illegally

 

KuCoin Required to Refund New York Users, Cease New York Operations, and Pay $5.3 Million Penalty

New York Attorney General Letitia James today secured more than $22 million from KuCoin, one of the largest cryptocurrency trading platforms, for failing to register as a securities and commodities broker-dealer and for falsely representing itself as a crypto exchange. Today’s consent order resolves Attorney General James’ lawsuit against KuCoin and requires the company to refund over 150,000 New York investors more than $16.7 million and pay more than $5.3 million to the state. KuCoin is also banned from trading securities and commodities in New York and is prohibited from making its platform available to New Yorkers. This consent order continues Attorney General James’ work to increase oversight and regulation of cryptocurrency companies and protect New York investors, which has recovered more than $500 million from predatory cryptocurrency platforms to date.

“Unregistered offshore crypto platforms pose a risk to investors, consumers, and the broader economy,” said Attorney General James. “Crypto companies should understand that they must play by the same rules as other financial institutions, and my office will hold them accountable when they don’t. This settlement will ensure every New Yorker who put their money into KuCoin can get it back and that KuCoin won’t be able to put other New York investors at risk. I will continue to take action against any company that brazenly disregards the law and jeopardizes New Yorkers’ savings and investments.”  

KuCoin is a Seychelles-based cryptocurrency trading platform that allows investors to buy and sell cryptocurrency through its website and mobile app. An investigator from the Office of the Attorney General (OAG) was able to create an account with KuCoin using a computer with a New York-based IP address to buy and sell cryptocurrencies, including popular tokens like ETH, LUNA, and UST. However, New York law requires securities and commodities brokers providing services in New York to register with the state, which KuCoin failed to do. By trading cryptocurrencies that are commodities and securities with its New York users, KuCoin violated state law. This included its own “KuCoin Earn” investment product, in which KuCoin pooled investors’ cryptocurrencies to generate income for its investors.

In addition, KuCoin claimed to be an exchange, but was not registered with the Securities and Exchange Commission as a national securities exchange or appropriately designated by the Commodity Futures Trading Commission as is required under New York Law.

KuCoin is required to provide full refunds totaling $16,766,642 to 177,800 New York investors. Investors can receive their refund by withdrawing their assets directly from KuCoin over the next 90 days. After 90 days, eligible investors can file a claim to receive their cryptocurrency by emailing kucoinrefund@ag.ny.gov.

In addition, KuCoin must take steps to prevent New Yorkers from accessing their platform and is prohibited from creating any new accounts for New York customers. Existing New York customers will only be able to withdraw their crypto from the platform. KuCoin must also cooperate with U.S. law enforcement by timely responding to requests to freeze assets and information requests.

Today’s announcement continues Attorney General James’ efforts to enforce New York laws in the cryptocurrency industry. In October, Attorney General James sued cryptocurrency companies Gemini, Genesis, and DCG for defrauding investors through DCG and Genesis’s concealment of $1.1 billion in losses and Gemini’s repeated lies to investors. In June, Attorney General James recovered $1.7 million from crypto exchange Coinex for operating illegally. In May, Attorney General James announced sweeping cryptocurrency legislation that will increase regulations of the cryptocurrency industry to protect New York investors. In January, Attorney General James and a multistate coalition recovered $24 million from the cryptocurrency platform Nexo for operating illegally. Attorney General James also sued the former CEO of Celsius for defrauding investors and concealing the company’s dire financial condition. In October 2021, Attorney General James directed unregistered crypto lending platforms to cease operations for not registering with the state. In September 2021, Attorney General James recovered $479.9 million from GTV Media for failing to register cryptocurrency sales. In February 2021, Attorney General James required Bitfinex and Tether to end all trading activity in New York and required iFinex and Tether and their related companies to pay $18.5 million in penalties.

Attorney General James urges New Yorkers who have been affected by deceptive conduct in virtual assets markets to report these issues to OAG. Attorney General James also encourages workers in the cryptocurrency industry who may have witnessed misconduct or fraud to file an online whistleblower complaint with her office, which can be done anonymously.