The Hong Kong-based crypto exchange CoinEx recently faced a settlement with the New York Attorney General’s office, resulting in a ban from conducting business in New York state. The settlement siphoned $1.7 million from CoinEx, after they failed to register as a securities and commodities broker-dealer within the state. A considerable portion of this amount, $1,172,971.50, is dedicated to reimbursements for CoinEx investors, with the remaining sum covering state-levied penalties.
New York Attorney General Letitia James highlighted the settlement as a cautionary tale for crypto companies that fail to comply with New York laws. She emphasized the risks unregistered crypto platforms pose to investors, consumers, and the broader economy. The Attorney General’s determination to crack down on crypto companies blatantly disregarding the law resonates in the CoinEx case.
The lawsuit against CoinEx was initially filed in February, under the allegation that the company committed repeated fraudulent practices. This accusation falls under the jurisdiction of New York’s Martin Act, which houses some of the toughest anti-fraud laws in the United States. Notably, a 2020 ruling deemed virtual currencies as commodities according to the 1921 law.
This is not the first crypto exchange to face legal action in New York, as evidenced by Attorney General James’ lawsuit against BitFinex in 2019. BitFinex was accused of covering up nearly $850 million in customer losses within its Tether reserves and was similarly ordered to cease New York operations in a February 2021 settlement.
According to James’ office, an October 2022 state investigation discovered that CoinEx accounts could be created using New York-based IP addresses. The settlement mandates that CoinEx geoblock these IP addresses and enforce a prohibition for US customers opening new accounts. Existing US customers will experience limitations, only being able to withdraw funds from CoinEx.
While New York law clearly supports the Attorney General’s authority to ban CoinEx within the state, it lacks the power to impose similar restrictions in other states. Despite this limitation, a spokesperson for the Attorney General’s office maintains that the settlement “codifies” CoinEx’s decision to avoid operating in the United States.
In the aftermath of the lawsuit, CoinEx shared a public statement, revealing its intention to terminate services for US users. Overall, the CoinEx settlement adds to a growing list of legal actions against crypto firms by the New York Attorney General’s office, which has accumulated $500 million in fines from these cases.
Source: Decrypt
