New York Attorney General Letitia James has taken decisive action against Hong Kong-based cryptocurrency exchange CoinEx, reaching a settlement in a lawsuit that accuses the exchange of illegal operations within the state. The settlement, which requires approval from a New York state court, includes a ban on CoinEx operating in New York and the seizure of over $1.8 million in funds.
The lawsuit alleges that CoinEx failed to register as a securities and commodities brokerage, as required by US regulations. In addition, the Attorney General’s Office claims to have created a CoinEx account using a New York-based computer and internet address, thereby demonstrating the exchange’s ability to facilitate trading in the state.
As part of the proposed settlement, CoinEx has agreed to pay $1.8 million, which includes a refund of $1.17 million to be distributed among 4,691 investors. The refund amount may be reduced if investors withdraw their cryptocurrency within 90 days. CoinEx would also face a fine of $626,000 as a deterrent against future non-compliance. It is worth noting that the settlement does not require CoinEx to admit any wrongdoing.
Attorney General James emphasized that the settlement should serve as a warning to other cryptocurrency companies, signaling that her office will continue to crack down on those that disregard the law and mislead investors. The allegations against CoinEx are based on violations of the Martin Act, a state law used to combat financial fraud, specifically related to the buying and selling of tokens without proper registration.
To further ensure compliance, the petition filed by James seeks a court order to prevent CoinEx from marketing itself as an exchange and operating within the state. This includes implementing geoblocking measures to prevent access from New York-based internet addresses and GPS location data.
The actions taken by the New York Attorney General’s Office against CoinEx align with the state’s broader efforts to regulate the cryptocurrency industry and combat fraud. In April, a bill was introduced to criminalize crypto fraud, particularly “rug pulls,” which received mixed reviews due to concerns over its broad language and potential constitutional issues. Additionally, the state’s Assembly imposed a temporary ban on non-green Bitcoin mining, primarily targeting energy providers, as part of its commitment to promoting environmentally-friendly practices in the crypto-mining sector.
It is also significant to note that CoinEx agreed to settle a lawsuit brought by New York Attorney General Letitia James accusing the cryptocurrency exchange of operating illegally since it did not register with the state by paying $1.8 million and receiving a lifetime ban from operating in the state.
While the settlement with CoinEx marks a significant step in holding cryptocurrency exchanges accountable, industry representatives and legal experts have raised concerns about the bill’s workability and the effectiveness of temporary mining bans. They argue that existing state and federal laws already cover many of the offenses the bill aims to criminalize. Nevertheless, these initiatives demonstrate New York’s ongoing dedication to regulating the crypto space, protecting investors, and fostering innovation in a responsible manner.