Grygo is the chief content officer for FTF & FTF News.
In mid-June, the state of New York stopped CoinEx, a Hong Kong-based firm, from offering its virtual currency trading platform to investors in all U.S. markets.
CoinEx’s global platform helps investors buy and sell cryptocurrency via its website and mobile app. But there was a catch for its U.S. clients. The company did not register as a securities and commodities broker-dealer in the Empire State.
The lack of registration caught the attention of Letitia James, the attorney general for New York, who launched and won a key battle against CoinEx, which will be paying $1.7 million essentially for not registering and for allegedly misrepresenting itself as a crypto exchange. This was a rather quiet resolution of a case that got a lot less attention than other crypto cases.
Photo by Karsten Winegeart on Unsplash
The resolution of this case means that CoinEx has agreed to “refund thousands of New York investors more than $1.1 million and pay more than $600,000 in penalties to the state,” according to the AG’s announcement. (See our initial story here: https://bit.ly/41z1gyh )
Specifically, the agreement “requires CoinEx to provide full refunds totaling $1,172,971.50 to 4,691 New York investors. Investors can receive their refund in the form of cryptocurrency directly from CoinEx over the next 90 days. After 90 days, eligible investors can receive their refund as U.S. currency from OAG by emailing coinexrefund@ag.ny.gov,” AG officials say.
“Each investor will be refunded the amount of cryptocurrency or the cash equivalent of the cryptocurrency they held in their accounts as of April 25, 2023,” the AG’s office says.
The resolution also means that CoinEx “must implement geoblocking to prevent New York IP [intellectual property] addresses from accessing their platform,” according to AG officials. “CoinEx is also prohibited from creating any new accounts for U.S. customers and existing U.S. customers can only withdraw their crypto from the platform.”
Before the resolution, the AG’s office reports that “an investigator from the Office of the Attorney General (OAG) was able to create an account with CoinEx using a computer with a New York-based IP address to buy and sell digital tokens although CoinEx was not registered with the state.”
Ultimately, the consent order bans CoinEx “from offering, selling, or purchasing securities and commodities in New York and … from making its platform available in the state. In response to Attorney General James’ lawsuit, CoinEx publicly announced that it would withdraw its platform and services from the United States,” according to the A.G.’s office.
“Unregistered crypto platforms pose a risk to investors, consumers, and the broader economy,” James says in a prepared statement, who wants the action to “serve as a warning to crypto companies that there are hefty consequences for ignoring New York’s laws. My office will continue to crack down on crypto companies that brazenly disregard the law, mislead investors, and put New Yorkers at risk.”
The CoinEx case was not the only crypto case for the AG’s office. James also brought cases against other crypto trading and crypto-lending firms that skipped registering with the state.
In addition, in May, James proposed what she calls “sweeping cryptocurrency legislation that will increase regulations of the cryptocurrency industry to protect New York investors.” (See our story here https://bit.ly/3pG74rb )
James also wants New York state residents “affected by deceptive conduct in virtual assets markets to report these issues” and she “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.”
FTF News reached out repeatedly to CoinEx to get its side of the story but there was no response by the deadline.
Letitia James
Part of the libertarian, cowboy-crypto-creed is to avoid registration with any government or any allegiance to a central bank. But, as we’re seeing, the U.S. federal government and central banks across the globe will be requiring registration, regulatory compliance, and protections for investors. And Tish James is not the only government official enforcing the law.
So, now, it looks as if the crypto cowboy strategy has utterly backfired — at least in New York.
It’s time for a new strategy of regulatory compliance and even a push for new and updated regulations. That will be the key to getting support from mainstream institutions, which is essential for crypto’s future.
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