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New York sues KuCoin, expands cryptocurrency crackdown

FILE PHOTO: 2022 U.S. midterm elections

By Jonathan Stempel

NEW YORK (Reuters) -New York's attorney general on Thursday sued KuCoin for failing to register with the state before letting investors buy and sell cryptocurrencies on its platform, as part of her effort to rein in what she calls "shadowy" cryptocurrency companies.

Attorney General Letitia James said the fourth-largest cryptocurrency platform violated the Martin Act, a powerful state securities law, by transacting in cryptocurrencies, selling the product "KuCoin Earn" to generate income for itself and investors, and wrongfully calling itself an "exchange."

In papers filed with a state court in Manhattan, James is seeking a permanent injunction to stop KuCoin from operating in New York until it complies with the law.

KuCoin did not immediately respond to requests for comment.

Launched in September 2017, KuCoin describes itself on its website as the "People's Exchange," with more than 27 million users across 207 countries and regions.

KuCoin trails Binance, Coinbase and Kraken in trading volume among cryptocurrency spot exchanges, according to the data company CoinMarketCap. It raised $150 million in a funding round last May, giving it a $10 billion valuation.

James said KuCoin has let investors trade popular virtual currencies such as ETH, LUNA and TerraUSD, and that her case is among the first by a regulator calling ETH a security.

"One by one my office is taking action against cryptocurrency companies that are brazenly disregarding our laws and putting investors at risk," James said in a statement.

Last month, James sued the CoinEx cryptocurrency platform for failing to register with the state.

In January, 10 states including New York secured up to $24 million from the cryptocurrency company Nexo Inc, which they also accused of operating illegally.

KuCoin is headquartered in the Seychelles. James said its owners are Mek Global Ltd, also based in the Seychelles, and PhoenixFin PTE Ltd, based in Singapore.

(Reporting by Jonathan Stempel in New York; Editing by Diane Craft and Daniel Wallis)