The CoinEx crypto exchange is facing legal action from the state of New York for allegedly failing to register with regulators. The lawsuit was filed by the New York Attorney General’s office on Monday, February 20, 2023.
According to the complaint, CoinEx has been operating in New York without registering with the state’s Department of Financial Services (DFS) since its launch in 2017. The exchange, which is based in Hong Kong, allows users to trade various cryptocurrencies, including Bitcoin, Ethereum, and Litecoin.
The lawsuit alleges that CoinEx’s failure to register with the DFS violates the state’s Martin Act, which requires businesses that engage in the sale of securities to register with regulators. The Martin Act gives the state broad authority to investigate and prosecute financial fraud, and has been used in the past to go after Wall Street firms and other financial institutions.
In a statement announcing the lawsuit, New York Attorney General Letitia James said that CoinEx’s “illegal conduct” had put New York investors at risk.
“CoinEx’s failure to register with the DFS has left New York investors vulnerable to fraud and other forms of financial abuse,” James said. “We will not tolerate this type of illegal conduct in our state, and we will use every tool at our disposal to hold companies accountable for their actions.”
CoinEx has not yet commented on the lawsuit. However, the exchange has previously stated that it does not believe it is subject to New York’s regulatory jurisdiction because it is based outside of the United States.
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The lawsuit against CoinEx comes as regulators around the world are stepping up their scrutiny of the cryptocurrency industry. In the United States, the Securities and Exchange Commission (SEC) has been cracking down on initial coin offerings (ICOs) and other forms of crypto-related fundraising that it deems to be securities offerings. The SEC has also been investigating crypto exchanges and other businesses involved in the cryptocurrency space.
New York has been particularly aggressive in its regulation of the cryptocurrency industry. In 2015, the state created the BitLicense, a regulatory framework that requires businesses that engage in virtual currency activities to obtain a license from the DFS. The BitLicense has been controversial, with some businesses complaining that it is too onerous and expensive to obtain.
The lawsuit against CoinEx is not the first time that the New York Attorney General’s office has gone after a cryptocurrency exchange for failing to register with regulators. In 2019, the office sued the Bitfinex exchange for allegedly hiding the loss of $850 million in customer funds. The lawsuit also alleged that Bitfinex had failed to register with the DFS.
The Bitfinex case was settled in 2021, with the exchange agreeing to pay $18.5 million in penalties and to stop serving New York customers. The settlement also required Bitfinex to provide quarterly reports to the Attorney General’s office for the next two years.
The CoinEx lawsuit is likely to be closely watched by other cryptocurrency exchanges and businesses that operate in New York. If the state is successful in its case against CoinEx, it could embolden other regulators to take similar actions against crypto businesses that they believe are operating in violation of state laws.
The cryptocurrency industry has been growing rapidly in recent years, with more and more investors and businesses getting involved in the space. However, the lack of regulatory oversight has also led to concerns about fraud and other forms of financial abuse.
In response to these concerns, some countries have begun to regulate the industry more closely. China, for example, has cracked down on crypto mining and trading, while India has proposed a ban on cryptocurrencies altogether.
In the United States, the regulatory environment for cryptocurrencies remains somewhat uncertain. While some states, like New York, have created regulatory frameworks for the industry, there is no federal law that governs cryptocurrencies specifically.
The CoinEx crypto exchange is being sued by the New York Attorney General’s office for allegedly failing to register with regulators. The lawsuit claims that CoinEx’s failure to register violates the state’s Martin Act and has put New York investors at risk. The cryptocurrency industry has been growing rapidly in recent years, and this lawsuit is likely to be closely watched by other exchanges and businesses operating in New York.