- OAG claims the Seychelles-based exchange should be registered as a ‘securities and commodities broker-dealer.’
The New York Attorney General’s office is suing the KuCoin cryptocurrency exchange for operating without proper registration and illegally selling Ether, Terra LUNA, and TerraUSD, considered securities and commodities in the state.
In a filing Thursday before the Supreme Court of the State of New York, Attorney General Letitia James faulted KuCoin for failing to register as a securities and commodities broker-dealer, misrepresenting itself as an exchange.
The lawsuit against the Seychelles-based crypto exchange also touched on the hotly contested debate – of whether Ether is a security or a commodity. James told the court that the second largest cryptocurrency, LUNA, and UST, all listed under KuCoin’s portfolio, are securities because they rely on the efforts of third-party developers to generate a profit for the holders.
How Ethereum raised funds at the onset through an Initial Coin Offering (ICO), and the incentives paid to the token stakers, under the proof of stake model, amount to the handling of securities, according to the AG. In light of the same, KuCoin was required to register with OAG before operating in New York.
KuCoin Earn Also Targeted
KuCoin also sells unregistered securities under its KuCoin Earn, a staking platform, against the state’s laws, the filing claimed. OAG experimented by creating a KuCoin account using a computer with a New York-based IP address and bought and sold cryptocurrency on the platform, for which it was charged a fee. It also deposited tokens into the KuCoin Earn product, which also deducted charges.
Attorney General James is now seeking the court’s intervention to stop KuCoin from portraying itself as an exchange, prevent the company from operating in New York, and to geo-block its mobile apps and website for New Yorkers through IP addresses and GPS location. It is not the first time that the KuCoin exchange, ranked fifth by daily trading volumes on CoinGecko, is clashing with the regulators. Last year, the exchange was accused by South Korea of operating illegal business activities with no proper documentation. The Dutch Central Bank has also made similar accusations.
