New York Attorney General Letitia James filed a lawsuit against Hong Kong-based crypto exchange CoinEx, alleging that the company is illegally providing crypto services because it is not registered with the state. In a 38-page petition filed Feb. 22 in New York state court in Manhattan, James accused CoinEx of “repeatedly and persistently engaging in fraudulent practices.”
She stressed that CoinEx did not register with the US Securities and Exchange Commission (SEC) as a securities and commodities broker-dealer before offering to buy and selling of the tokens.
The announcement stated:
“Coinex claimed to be an exchange, but is not registered with the Securities and Exchange Commission (SEC) as a national securities exchange or appropriately designated by the Commodity Futures Trading Commission (CFTC) as is required under New York law.”
She also confirmed CoinEx listed various tokens that qualified as both securities and commodities, naming LBRY Credits (LBC), Terra (LUNA), AMP, and Rally (RLY).
The Office of the Attorney General (OAG) revealed that they created an account with CoinEx using a New York-based computer and IP address to buy and sell crypto assets. OAG found that it could trade on the platform even though the exchange is not registered in the state.
However, the company violated the Martin Act, a New York state law. This law deals with fraud or misrepresentation in the public offering, selling, and purchasing of commodities and securities.
The announcement details:
“The Office of the Attorney General (OAG) was able to buy and sell cryptocurrencies on Coinex in New York, although the company is unregistered in the state, which is a violation of New York’s Martin Act.”
CoinEx Didn’t Comply With The Subpoena Issued By OAG
CoinEx is also accused of failing to comply with a subpoena sent by the Attorney General’s Office on December 22, 2022, the petition states. The objective was to obtain testimony from the company about its platform’s virtual asset trading activities.
The firm was also scheduled to appear under oath on January 9, 2023, but failed to do so. Hence, the failure to appear was taken as primary evidence that CoinEx was involved in fraudulent practices.
CoinEx released a statement on Thursday in response to Attorney General James’ enforcement action.
The exchange announced on Twitter:
“Given the recent lawsuit against CoinEx for allegedly operating an unregistered cryptocurrency exchange, we are paying high attention to the allegations and taking active steps to address New York Attorney’s concerns promptly.”
Meanwhile, the company has not yet specified what these steps are.
The company said it always tried to operate in accordance with the regulatory framework and aims to be a safe and secure crypto exchange.
The Attorney General said she wants the exchange to stop operating in New York. However, James’ lawsuit seeks a ban on access to CoinEx’s website and mobile app from the state.
I'm suing cryptocurrency platform @coinexcom for illegally operating in New York without registering with the state.
⏰Wake-up call: crypto platforms must play by the same set of rules as everyone else.
— NY AG James (@NewYorkStateAG) February 22, 2023
“Our laws are designed to protect New Yorkers, and when companies ignore them, they put residents, investors, and businesses at risk.” “The days of crypto companies like CoinEx acting like the rules do not apply to them are over.”
Letitia James has been successful in such lawsuits. In January, she and a multi-state coalition secured $24 million from crypto lender Nexo Inc. and its affiliate. Both were charged with operating without a proper license and falsely reporting their registration status.