LUCKNOW (CoinChapter.com) — Cryptocurrency exchange KuCoin has agreed to a $22 million settlement with the state of New York to resolve allegations that it illegally operated without proper registration and misled investors. The settlement includes $16.7 million in refunds that will be paid out to 177,800 New York-based KuCoin investors. This comes in addition to a $5.3 million fine that KuCoin will pay directly to New York state.
KuCoin CEO Johnny Lyu acknowledged the settlement deal in a post on Twitter.
As part of settlement terms, KuCoin has agreed to fully prohibit New York-based investors from accessing its platform within the next 120 days per the Attorney General’s order.
The company must identify and close all relevant trading accounts tied to customers with New York addresses or residencies.
Key Allegations in New York’s Lawsuit Against KuCoin
New York Attorney General Letitia James brought the lawsuit against KuCoin in March 2022. The suit alleged that KuCoin falsely marketed itself as a licensed crypto exchange despite not being registered as a securities or commodities broker-dealer as required under state law.
By failing to properly register with regulators like the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), James argued that KuCoin deprived New York investors of certain legal protections and oversight around their trading activities.
“Unregistered offshore crypto platforms pose a risk to investors, consumers, and the broader economy,” James said in the statement.
“I will continue to take action against any company that brazenly disregards the law and jeopardizes New Yorkers’ savings and investments.”
she added.
A key allegation in New York’s lawsuit was that KuCoin offered trading of digital tokens, like the popular ether cryptocurrency, that qualify as unregistered securities under state financial laws.
The Attorney General’s office also flagged issues around stablecoins like Tether (USDT), where they alleged KuCoin failed to confirm adequate USD reserves fully backed the tokenized assets at a 1:1 ratio. Stablecoins promise to maintain a steady value, so inadequate reserves put investors at risk.
Intensifying Legal Action Against Crypto Firms by New York regulators
The KuCoin settlement also caps a recent flurry of aggressive legal actions brought by New York against major industry players accused of defrauding crypto investors or operating illegally. Another high-profile case includes the billion-dollar lawsuit against Gemini, Genesis Trading, and the Digital Currency Group umbrella over allegations the companies knowingly engaged in unbacked lending activities that ultimately crushed crypto prices when exposed.
The settlement signifies an aggressive push by New York regulators to exert more control over the largely unregulated crypto industry, especially in the wake of major platform collapses like FTX that have cost investors billions. It also comes just weeks after New York extracted a similar $1.8 million settlement from the Hong Kong-based exchange CoinEx on the same grounds.
