In a significant development, KuCoin has recently settled with the state of New York, agreeing to a substantial payment of $22 million. This settlement arises from allegations of KuCoin offering, selling, and purchasing cryptocurrencies as securities and commodities, thus violating New York’s laws.
KuCoin has acknowledged the charges brought by the New York State’s Attorney General, Letitia James, and has committed to a payment of $5.3 million. In addition to the financial settlement, KuCoin has agreed to specific obligations as part of the consent order. These obligations include the termination of access to its services for Resident users in New York within a stipulated timeframe, ceasing the creation of new accounts, and restricting existing accounts solely for withdrawal purposes.
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As part of the settlement, KuCoin is committed to returning current account balances, totaling approximately $16.7 million in fiat and cryptocurrencies, held by customers in New York. This complex restitution process involves facilitating withdrawals and transferring remaining balances to a third-party fund administrator for subsequent distribution to the affected users.
KuCoin’s Compliance Journey
The legal saga began in March when the New York State’s Attorney General’s Office filed a lawsuit against KuCoin. Letitia James alleged that KuCoin operated illegally within the state, marking a pivotal moment as it was the first time a regulatory body labeled Ether, alongside other cryptocurrencies, as securities under the Martin Act.
The lawsuit specifically accused KuCoin of offering unregistered securities through its KuCoin Earn product, a lending and staking service. The case was substantiated by the NYAG’s office, which interacted with the platform using a New York IP address, conducting transactions and demonstrating the platform’s operational engagement.
In addition to the New York lawsuit, KuCoin has faced regulatory challenges globally. Last year, South Korea’s Financial Intelligence Unit (FIU) intensified its crackdown on unauthorized overseas crypto exchanges. KuCoin, among 16 platforms, was allegedly operating in the country without complying with local regulatory guidelines. The FIU urged the Korea Communications Commission to block access to the websites and mobile applications of these platforms, citing non-compliance with the Financial Information Act.