KuCoin Bows Out of New York with $22M Lawsuit Settlement

KuCoin pays $22M to end New York lawsuit over crypto trading

KuCoin, one of the world's largest cryptocurrency exchanges, has agreed to restrict New York customers from its website and pay US$22 million to resolve a lawsuit filed by the state as part of its efforts to reign in digital asset firms.

The lawsuit, which was filed in September 2022, alleged that KuCoin violated New York's Martin Act by offering unregistered securities and commodities to New York residents without obtaining a license or registering with the state authorities.

The lawsuit also claimed that KuCoin failed to implement adequate anti-money laundering and consumer protection measures, exposing its users to fraud, theft, and hacking risks.

According to the settlement agreement, KuCoin will cease all operations in New York and will not accept any new customers or transactions from the state. KuCoin will also pay US$22 million in penalties and disgorgement to the state and will cooperate with any ongoing or future investigations by the Attorney General's office.

The settlement marks the latest crackdown by New York regulators on the crypto industry, which has been under increased scrutiny for its compliance with state and federal laws.

In January 2023, Coinbase, another major crypto exchange, reached a US$100 million settlement with the New York Department of Financial Services over its anti-money laundering violations.

New York Attorney General Letitia James said in a statement that the settlement with KuCoin sends a clear message to the crypto industry that New York will not tolerate any illegal or unregulated activities that harm its residents or its financial markets.

"KuCoin operated in the shadows, putting profits over people and ignoring our laws," James said. "We will continue to hold accountable any crypto platform that violates our laws and jeopardizes the safety and security of New Yorkers' hard-earned money."

KuCoin, which is based in Seychelles, said in a statement that it respects the settlement and that it has taken steps to improve its compliance and security standards.

"KuCoin has always been committed to providing a safe, secure, and compliant platform for our global users," the statement said. "We appreciate the constructive dialogue and cooperation with the New York Attorney General's office and we look forward to continuing to serve our customers in other jurisdictions."

In March, Attorney General Letitia James filed a lawsuit against Seychelles-based KuCoin, accusing the site of failing to register with the state before allowing investors to purchase and trade cryptocurrencies on its platform.

"Crypto companies should understand that they must play by the same rules as other financial institutions," James said in a statement on Tuesday.

The agreement, in which KuCoin also agreed to cease trading securities and commodities in New York, comes as US authorities and law enforcement agencies tighten down on cryptocurrency fraud, money laundering, and inadequate investor safeguards.

Genesis Global, its parent company Digitial Currency Group, and Gemini were sued by James' office in October for allegedly scamming investors of more than $1 billion. DCG dismissed the case as groundless.

Her agency achieved a US$1.8 million settlement with Hong Kong-based cryptocurrency exchange CoinEx in June for operating unlawfully due to a failure to register with the state.

Last month, FTX founder Sam Bankman-Fried was convicted on US allegations of stealing billions of dollars from FTX consumers, while the founder of competitor Binance agreed to plead guilty to violating US anti-money laundering rules.

KuCoin's US$22 million payout includes a US$5.3 million payment to the state and a US$16.7 million return to 177,800 New York investors.

According to the analytics company CoinMarketCap, KuCoin trails Binance, Coinbase, and Kraken among cryptocurrency spot exchanges in terms of traffic, liquidity, and trading volumes.