The New York Attorney General, Letitia James, has charged CoinEx for failing to register as a securities and commodities broker-dealer, and for falsely promoting itself as a crypto exchange.
“The days of crypto companies like CoinEx acting like the rules do not apply to them are over”, she said.
In the course of the investigation, the Office of the Attorney General (OAG) managed to buy and sell cryptocurrencies on CoinEx in New York, even though the company is unregistered in the state – in contravention of New York’s Martin Act.
Unregistered exchange
New York law requires securities and commodities brokers to register with the state, which CoinEx failed to do.
“Our laws are designed to protect New Yorkers, and when companies ignore them, they put residents, investors, and businesses at risk”, James said.
“The days of crypto companies like CoinEx acting like the rules do not apply to them are over.”
AG Letitia James
To add to the charges, CoinEx is also claiming to be an exchange but is not registered with the SEC as a national securities exchange, or appropriately designated by the Commodity Futures Trading Commission (CFTC) as is required under New York law. The company also failed to comply with a subpoena requesting more information about its digital asset trading activities in the state.
The lawsuit seeks to stop CoinEx from misrepresenting that it is an exchange, to prevent the company from operating in New York, and to implement a geo-blocking that will prevent IP addresses from New York accessing the website and app.
Other crypto actions
AG James has taken actions against several other crypto firms. Last month, she and a multistate coalition recovered $24m from the crypto platform Nexo.
“Cryptocurrency companies are unreliable and shady, but they are not immune from accountability. Nexo ignored repeated warnings by my office to register and today they are paying the price for their wrongdoing”, she said James.
She also sued the former Celsius CEO Alex Mashinsky in January, for defrauding investors and repeatedly making false and misleading statements.
In June 2022, James reached a settlement close to $1m with the crypto lender Blockfi for its offering of unregistered securities. In September 2021, she shut down the trading platform Coinseed, and directed unregistered crypto lending platforms to cease their operations for not fulfilling legal obligations a month later.