New York Attorney General Letitia James has issued a ban on CoinEx, a prominent cryptocurrency exchange headquartered in Hong Kong. In a decisive move on June 15, the Attorney General seized an impressive $1.7 million in assets belonging to the exchange.
The action was taken due to CoinEx’s alleged violation of regulations concerning registration as a securities and commodities brokerage.
The enforcement comes as a resolution to a legal battle that commenced in February, when the state of New York filed a lawsuit against CoinEx. The exchange was accused of engaging in deceptive practices by misrepresenting itself as a legitimate platform while failing to comply with the mandatory registration requirements outlined by local authorities.
“As part of today’s consent order, CoinEx is banned from offering, selling, or purchasing securities and commodities in New York and is prohibited from making its platform available in the state,” reads the announcement.
Under the terms of the agreement reached between CoinEx and the New York Attorney General’s office, a substantial portion of the seized funds—specifically, a staggering $1.1 million—will be duly returned to no less than 4,691 investors hailing from New York. This restitution seeks to compensate those affected by the exchange’s alleged violations.
In addition to the restitution, CoinEx will be obligated to fulfill financial obligations to the state, amounting to more than $600,000 in penalties. This punitive measure serves as a deterrent against future noncompliance with regulatory requirements.
To ensure compliance with the ban and prevent any further breaches, CoinEx has been instructed to implement strict geo-blocking measures. This mechanism aims to restrict access to the exchange’s platform by effectively blocking IP addresses originating from New York. By doing so, the authorities seek to curtail any potential illicit activities by New York-based users.
Furthermore, CoinEx is unequivocally prohibited from creating any new accounts catering to customers based in the United States. This measure aims to prevent the establishment of any potential avenues through which the exchange might circumvent the ban and continue operating within the U.S. market.
“Today’s agreement should serve as a warning to crypto companies that there are hefty consequences for ignoring New York’s laws. My office will continue to crack down on crypto companies that brazenly disregard the law, mislead investors, and put New Yorkers at risk,” said James in the announcement.
Over the course of the next 90 days, users of CoinEx will have the opportunity to recover their cryptocurrency funds directly from the exchange itself. This initiative seeks to ensure that affected individuals are able to reclaim what rightfully belongs to them. However, once this 90-day period elapses, eligible investors will need to follow a different process to receive their funds in fiat currency. They will be required to send an email to firstname.lastname@example.org, initiating the necessary steps to obtain their reimbursements.
According to the official announcement, investors will be entitled to receive either their original cryptocurrency holdings or an equivalent amount in cash, depending on their preferences and circumstances. It is worth noting that this refund scheme exclusively applies to funds held in CoinEx accounts as of April 25, 2023.
The legal action against CoinEx was set into motion on February 22, when Attorney General Letitia James filed a lawsuit against the exchange in the New York Supreme Court. The lawsuit leveled serious allegations against CoinEx, accusing the platform of engaging in a pattern of repeated fraudulent practices. Furthermore, it alleged that CoinEx violated the Martin Act, a robust anti-fraud law that holds significant weight within the state of New York.
In her complaint, Attorney General James classified various tokens, including Amp, LBRY Credits (LBC), Rally (RLY), and Terra, as assets falling under the purview of both commodities and securities. This classification demonstrates the wide range of tokens implicated in the allegations against CoinEx, emphasizing the significance of the case in terms of potential regulatory ramifications.