The New York attorney general’s office (OAG), led by Letitia James, filed a lawsuit against KuCoin. The cryptocurrency exchange was accused of violating securities laws by offering tokens without a license.
According to the release, the platform was not registered as a broker-dealer and “misrepresented itself as an exchange.” The authorities’ claims also concern the KuCoin Earn product.
“[…] my office is taking action against cryptocurrency companies that brazenly ignore our laws and put investors at risk,” James said.
Among the assets the OAG counted as securities is Ethereum. This is the first time the regulator has asserted this in court, the press release said.
“ETH, like LUNA and UST, is a speculative asset that relies on the efforts of third-party developers to provide profits to holders of the asset. Therefore KuCoin should have registered before selling ETH, LUNA or UST,” James said.
The Office found that KuCoin operated without proper authorization “in many jurisdictions, including the Seychelles, Canada and the Netherlands.” In December 2022, the latter’s central bank warned consumers that the company was providing services in the country without the necessary registration.
Earlier, the Ontario Securities Commission warned against dealing with the crypto exchange. In 2021, the regulator accused the platform-related structures of non-compliance with local laws and prohibited its operations.
The OAG’s suit seeks to halt the exchange’s activities in New York, and to block access to its website, services, and mobile application.
“[The prosecutor’s office] once again urges New Yorkers who have been harmed by deceptive conduct in the virtual asset market to report these issues to the OAG. James also encourages cryptocurrency-industry workers who may have witnessed improper actions or fraud to file a whistleblower complaint with her office, which can be done anonymously,” the statement said.
On February 22, James filed suit against CoinEx alleging unlawful business activity—without registration in the state. Later, media reports indicated that the exchange had decided to discontinue serving US customers.
Previously, Kraken ran into regulatory trouble. The company agreed to shut down its staking program for U.S. users and will pay $30 million in penalties.
From April 1, the crypto-lending platform Nexo will discontinue offering the Earn Interest Product to U.S. investors.
In February, Gary Gensler, chairman of the SEC hinted at classifying cryptocurrencies other than Bitcoin as securities.