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KuCoin to Shutter Services in New York After $22 Million Settlement Package – Here’s the Latest

Jimmy Aki
Last updated: | 2 min read
Source: Pexels

The KuCoin crypto exchange is set to shutter its operations in the ‘Big Apple’ following an agreement with the Supreme Court of the State of New York County.

Besides restricting access to its platform for New York residents, KuCoin has agreed to pay a $5.3 million fine to the Attorney General’s Office of the county to settle charges brought against it.

As part of the settlement, New York residents who have engaged in digital asset transactions and held funds on the platform (whether in fiat or virtual currencies) will receive a refund totaling $16.77 million, putting the total settlement package at $22.07 million.

The stated customer refund represents the total amount held by KuCoin following the court’s judgment.

The legal proceedings date back to March 19, 2023, when the Office of the Attorney General (OAG) filed legal petitions against KuCoin, alleging violations of the Martin Act, which prohibits the unlawful sale, offer, and purchase of securities and commodities in the form of crypto assets in the state.

The OAG further stated that KuCoin falsely portrayed itself as an exchange on its website without obtaining the necessary clearance from relevant authorities.

KuCoin is now required to close all customer accounts and return the funds within a 120-day period or face legal consequences, effective immediately after the Supreme Court’s announcement.

Confirming the development on his official X (formerly Twitter) handle, KuCoin’s CEO Johnny Lyu stated that the agreement with the New York Attorney General’s office aligns with the company’s ongoing commitment to regulatory compliance.

Lyu also assured affected KuCoin customers that they would receive an SMS or email within 10 days to guide them through the account deletion process and emphasize the security of their digital assets.

Following the commencement of the NYAG’s inquisition into the “People’s Exchange” in March, Attorney Letitia James made a profound statement that Ether is a security.

Defunct Terra blockchain’s LUNA coin and UST stablecoin were also termed as security by the NYAG.

According to a press release by the NYAG, Ether, LUNA, and UST are speculative assets that rely on third-party developers to provide profit to their holders. As a result, KuCoin was required by law to register with the relevant state regulator before offering any of the underlying assets.

KuCoin Not the Only Target

While many world governments have previously given mere verbal acknowledgment to crypto regulation, recent times have witnessed a significant shift as regulators have increasingly focused on the burgeoning industry over the past two years.

KuCoin’s latest ordeal follows the same regulatory-by-enforcement approach that the Kraken exchange has grappled with in the past month.

The US Securities and Exchange Commission (SEC) alleged that the crypto exchange commingled users’ funds as well as corporate assets and listed unregistered securities.

Kraken has since denied these allegations, stating that the supposed “commingled funds” are basically the spending fees it has already earned from providing services to its customers.

The US-based exchange also said it would defend itself in the court.