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KuCoin agrees to ban New York residents and pay $22 million in settlement

KuCoin users from New York will lose the ability to trade within 30 days and will have their accounts closed within 120 days.

Crypto exchange KuCoin has agreed to pay $22 million to the State of New York and to bar residents of the state from using its platform, according to a stipulation and consent order filed in the New York Supreme Court on Dec. 12.

According to the order, KuCoin admits that it “operates a cryptocurrency trading platform on which users, including users in New York state, can purchase or sell cryptocurrencies which are securities or commodities as defined under the laws of New York state and that Kucoin is not registered as a securities or commodities broker-dealer.” In addition, KuCoin “admits that it represented itself as an ‘exchange’ and was not registered as an exchange pursuant to the laws of New York State.”

KuCoin has agreed to close the accounts of all New York resident users within 120 days and to prevent New York residents from obtaining accounts in the future. In addition, it will restrict access to withdrawals to only within 30 days, leaving the remaining 90 days available for users to withdraw funds.

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NYDFS adopts regulation to assess supervisory costs for licensed crypto firms

Since 2015, crypto firms operating in the state of New York have largely been required to apply for a BitLicense to offer services.

The New York State Department of Financial Services has adopted a regulation that will allow the government agency to assess supervisory costs from licensed crypto firms operating in the state.

In an April 17 announcement, the NYDFS said the supervisory costs enforced by the new regulation would be used for “adding top talent to its virtual currency team.” The government department will assess costs for the supervision and examination of crypto firms operating in the state with a BitLicense.

“This regulation provides the Department with additional tools and resources to regulate the virtual currency industry now and in the future as innovators create new products and use cases for digital assets,” said NYDFS Superintendent Adrienne Harris.

Crypto firms operating in the state of New York are largely required to apply for a BitLicense, a requirement for companies since 2015. The NYDFS proposed adopting the regulation to assess costs in December 2022, after which time it met with “key stakeholders” and received feedback. According to the regulator, the proposed rule was added in response to the state’s Financial Services Law not including such a provision on the assessment of operating costs.

Related: New York Assembly introduces crypto payments bill for fines, taxes

The NYDFS listed 33 companies involved in crypto and blockchain operating in the state under a virtual currency license, limited purpose trust charter, or money transmitter license as of Feb. 10. New York City Mayor Eric Adams suggested the state scrap the BitLicense regime in April 2022, claiming the requirements stifled innovation and economic growth.

Magazine: Crypto City: Guide to New York

Update (April 17 at 8:57 PM UTC): This article incorrectly stated the NYDFS announcement was on April 16. It has been updated to reflect the correct date, April 17.

Sam Bankman-Fried to propose revised bail package ‘by next week’

The move comes after a judge expressed displeasure about SBF’s use of encrypted-messaging apps and virtual private network services while on bail.

The lawyer representing crypto entrepreneur Sam Bankman-Fried (SBF) in the ongoing FTX case will soon present a revised bail package to Judge Lewis Kaplan of the Southern District of New York. The move comes after Kaplan expressed displeasure about SBF’s use of encrypted-messaging apps and virtual private network (VPN) services while out on bail.

Legal proceedings around FTX’s downfall led SBF to avoid possible jail time with a $250 million bail bond. However, while on bond, the entrepreneur used Signal, an end-to-end encrypted messaging service, to contact former FTX and Alameda colleagues. Kaplan forbade SBF from using such apps and threatened to revoke bail privileges if he acted out of order.

Following up on this order, Bankman-Fried’s lawyer, Christian Everdell, revealed on March 18 that SBF and federal prosecutors “have been working diligently to agree on a set of specific bail conditions that will address the concerns expressed by the government and the court,” Bloomberg reported. In the letter, Everdell stated:

“We believe we are close to a resolution and anticipate being able to present the court with a proposed order outlining these conditions by next week.”

SBF maintains his innocence in claims relating to the misappropriation of FTX users’ funds. However, the entrepreneur could face 115 years of jail time if found guilty under the eight counts against him.

Related: FTX debtors report $11.6B in claims, $4.8B in assets, with many crypto holdings ‘undetermined’

During the ongoing restructuring of FTX, the current administrators revealed that FTX and Alameda Research’s former top brass received $3.2 billion in payments and loans from FTX-linked entities.

Out of the lot, Bankman-Fried reportedly received the lion’s share of the funds at $2.2 billion.

As Cointelegraph reported, FTX’s management is investigating its rights to pursue potential action against the recipients and their subsequent transferees.

CoinEx crypto exchange sued by New York for failing to register with state

The New York Attorney General is looking for a court order to remove the exchange from the state and wants it to block all internet addresses originating from New York.

Cryptocurrency exchange CoinEx has been sued by New York Attorney General Letitia James, who alleges the firm falsely represented itself as an exchange by failing to register as a securities and commodities broker-dealer in the state.

A 38-page petition filed by James in the New York Supreme Court on Feb. 22 alleged CoinEx “engaged in repeated and persistent fraudulent practices” and violated the state’s Martin Act — considered one of the most strict anti-fraud and securities regulation laws in the United States.

She also asserted CoinEx listed various tokens that qualified as “both commodities and securities,” naming Amp (AMP), LBRY Credits (LBC), Rally (RLY) and Terra (LUNA).

In a Feb. 22 statement, James said that CoinEx is not registered with the Securities and Exchange Commission or the Commodity Futures Trading Commission, “as is required under New York law” to sell the tokens.

The Attorney General’s Office created a CoinEx account with a New York-based computer and internet address and alleged it was able to trade on the platform.

“The days of crypto companies like CoinEx acting like the rules do not apply to them are over,” she added.

Related: Rep. Maxine Waters says all US regulators ‘better get together on crypto’

The petition also states that CoinEx failed to comply with a Dec. 22 subpoena sent by the Attorney General’s Office in order to “provide testimony concerning the virtual asset trading activities of its platform.”

“CoinEx was compelled by subpoena to appear for an examination under oath on January 9, 2023, and failed to appear […] CoinEx’s non-appearance is prima facie proof that CoinEx has engaged in the [mentioned] fraudulent practices.”

In the petition, James is seeking a court order to stop CoinEx from marketing itself as an exchange and prevent it from operating in the state by ordering it to geoblock internet addresses and GPS location data originating from New York.

Cointelegraph contacted CoinEx for comment but did not receive an immediate response.

Paxos ‘categorically disagrees’ with the SEC that BUSD is a security

Paxos said it will engage with the U.S. securities regulator on the matter and is prepared to “vigorously litigate if necessary.”

Paxos Trust Company says it “categorically disagrees” with the United States securities regulator that has described Binance USD (BUSD) as a security. 

In the Feb. 13 statement, the BUSD issuer confirmed recent reports that it had received a Wells notice from the United States Securities and Exchange Commission over BUSD and its alleged failure to register the offering under federal securities laws.

“Paxos categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws,” Paxos said.

The firm noted it had received the notice on Feb. 3, adding that “there are unequivocally no other allegations against Paxos.”

“We will engage with the SEC staff on this issue and are prepared to vigorously litigate if necessary,” it added.

On Feb. 13, the New York Department of Financial Services (NYDFS) ordered Paxos to halt the issuance of BUSD.

Paxos says it will comply, tweeting on Feb. 13 that it will halt the minting new BUSD tokens effective Feb. 21.

However, Paxos has said BUSD will remain fully supported and redeemable to onboarded customers through at least February 2024.

”New and existing Paxos customers will be able to redeem their funds in US dollars or convert their BUSD tokens to Pax Dollar (USDP), a regulated US dollar-backed stablecoin also issued by Paxos Trust,” Paxos said.

Related: SEC lawsuit against Paxos over BUSD baffles crypto community

New York State’s Department of Financial Services, or NYDFS, reportedly received a complaint from stablecoin issuer Circle regarding Binance’s reserves prior to its crackdown on BUSD.

Binance CEO Changpeng “CZ” Zhao says the exchange will continue to support BUSD despite issuer Paxos being ordered to stop minting the stablecoin by the U.S. SEC and New York regulators.

London emerges as world’s most crypto-ready city for business — research

An examination of eight key data points determined London to sport the highest crypto readiness to entice businesses and start-ups.

Along with pro-crypto regulations, mainstream adoption of cryptocurrencies requires a supporting infrastructure that can allow the general public access and exposure to the ecosystem. When considering eight key indicators around taxes, ATMs, jobs and events in crypto, London stands at the top as the most crypto-ready city in the world for businesses and start-ups.

United Kingdom Prime Minister Rishi Sunak’s vision to “ensure the U.K. financial services industry is always at the forefront of technology and innovation” is on the right path, research conducted by Recap shows. An examination of eight key data points determined London to sport the highest crypto-readiness to entice businesses and start-ups.

Top 20 crypto-ready cities in the world. Source: Recap

As shown above, leading metropolitan cities such as Dubai and New York made it to the top three in the list. However, Hong Kong, which was positioned as the most crypto-ready country in 2022, fell to seventh place in the research.

Top 50 crypto hubs, city-wise comparison. Source: Recap

The above list shows the top 50 major cities with an infrastructure ready for the mass adoption of cryptocurrencies.

Some key factors considered in the study include the total number of crypto-specific events, crypto-related jobs, crypto-specific companies and the number of crypto ATMs. Some of the non-crypto considerations include quality of life, research and development spending as a percentage of gross domestic product and capital gains tax rate.

Of the lot, London is home to the most people working in crypto-related jobs — an indication of higher interest among the general public in the crypto ecosystem. However, other cities overshadow London in some metrics, strengthening the case for the global adoption of cryptocurrencies.

Related: Bitcoin nodes data: Frankfurt houses the largest city-wide network

Steering forward in the quest to stay at the forefront, the Bank of England and the His Majesty’s Treasury highlighted the need to launch a central bank digital currency by 2030.

Cointelegraph previously reported that sources claim that the “digital pound” roadmap is set to be introduced by mid-February. The U.K. reportedly experienced a 35% drop in cash and coin payments in 2020, indicating a trend toward cashless transacting.

NYDFS advises crypto firms not to commingle user and corporate funds in the event of insolvency

“A VCE’s customer agreement should make clear the parties’ intentions to enter into a custodial relationship, rather than a debtor-creditor relationship,” said the NYDFS.

The New York Department of Financial Services, or NYDFS, has released guidelines on how licensed crypto firms should handle customer assets should they face “insolvency or similar proceeding”.

In a Jan. 23 announcement, NYDFS superintendent Adrienne Harris said crypto firms and exchanges operating under a BitLicense — required in New York state — should segregate corporate funds from users’ virtual currency holdings both on-chain and in the “internal ledger accounts” of the company’s custodian. According to the regulator, crypto firms are expected to hold users’ assets “only for the limited purpose of carrying out custody and safekeeping services”:

“A [virtual currency entity’s] customer agreement should make clear the parties’ intentions to enter into a custodial relationship, rather than a debtor-creditor relationship.”

In addition to these guidelines, NYDFS added that all licensed firms custodying assets should “maintain appropriate books and records” as well as disclose information related to its products and services in terms and conditions available to customers. Harris said the guidance was aimed at the “safekeeping of customer assets”.

The announcement followed several crypto exchanges based in the United States filing for Chapter 11 bankruptcy protection after some reported liquidity issues, including FTX, BlockFi, Voyager Digital, and Genesis. Many former customers of the crypto firms have not been made whole amid bankruptcy proceedings.

Related: New York proposes to charge crypto companies for regulating them

Harris said during a November 2022 speech that lawmakers at the federal level should consider a “framework nationally that looks like what New York has” in terms of crypto regulation, referring to the state’s BitLicense regime. The NYDFS has also previously released regulatory guidance for U.S. dollar-backed stablecoins.

Law Decoded, Jan. 9-16: Gemini, Bithumb, Nexo are fresh targets for regulation and prosecution

While the FTX saga continues to make headlines, last week brought a plethora of new troubles for crypto companies in the United States, Europe and Asia.

The United States Securities and Exchange Commission charged cryptocurrency lending firm Genesis Global Capital and crypto exchange Gemini with selling unregistered securities through Gemini’s “Earn” program.

The Commodity Futures Trading Commission started the process of getting a default judgment in its case against Ooki DAO after the decentralized autonomous organization missed the deadline to respond to the lawsuit. It also filed suit against digital artist Avraham Eisenberg and charged him with two counts of market manipulation in connection with an exploit of the decentralized finance platform, Mango Markets.

In South Korea, tax agents raided the Seoul headquarters of cryptocurrency exchange Bithumb, looking for evidence of possible tax evasion. This development comes after former Bitchumb chair Lee Jung-Hoon was acquitted of $70 million in fraud charges. In the Bulgarian capital of Sofia, the offices of crypto lending firm Nexo were raided by police. They targeted a large-scale money laundering scheme and violations of Russia’s international sanctions.

While the FTX saga continues to make headlines, last week brought a plethora of new troubles for crypto companies in the United States, Europe and Asia. 

Voyager and Binance.​US deal given the green light 

There’s still a place for good news. Bankrupt crypto lender Voyager Digital has finally received initial court approval for its proposal to sell its assets to Binance.US for $1.02 billion. The approval comes amid a national security probe concerning Binance.US that Voyager seeks to speed up. The Voyager Official Committee of Unsecured Creditors — a body representing creditors with no security interests in Voyager — supported the transaction in its current form, noting the deal would result in greater recoveries for creditors than if Voyager liquidated its holdings itself.

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New York sued by environmental group after approval of crypto mining facility

In September 2022, the Public Service Commission of New York authorized the conversion of the Fortistar North power plant into a crypto-mining site. Now it faces a lawsuit, with the Clean Air Coalition of Western New York and the Sierra Club claiming that the Fortistar plant only operated during periods of high demand for electricity, such as extreme weather conditions. However, as a crypto mining plant, the site would run 24 hours a day, generating up to 3,000% more greenhouse gas emissions.

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All you need to know about the FTX from last week

As the investigation into FTX continues, the crypto exchange’s former engineering chief, Nishad Singh, followed former FTX and Alameda Research executives Gary Wang and Caroline Ellison by reportedly meeting with federal prosecutors to cut a deal. 

The former president of FTX US, Brett Harrison, has lashed out at Sam Bankman-Fried for manipulating and threatening colleagues who proposed solutions to reorganize FTX US’ management structure. Despite recalling Bankman-Fried to be a “sensitive and intellectually curious person” at first, Harrison said he saw “total insecurity and intransigence” in Bankman-Fried when confronted with conflict, particularly when Harrison suggested FTX US establish separate branches for its executive, developer and legal teams.

Meanwhile, FTX was approved to sell some of its assets to aid efforts to repay creditors. Judge John Dorsey has approved the sale of four key units of FTX, including the derivatives platform LedgerX, the stock-trading platform Embed and its regional arms, FTX Japan and FTX Europe.

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NY AG files lawsuit against Alex Mashinsky, alleging he hid Celsius’ ‘dire financial condition’

Alex Mashinsky’s actions leading up to Celsius declaring bankruptcy allegedly contributed to investor losses by misrepresenting the platform’s financial condition to investors.

New York Attorney General Letitia James has filed a lawsuit against Alex Mashinsky, alleging the Celsius founder and CEO made numerous “false and misleading statements” which led to investors losing billions. 

In a Jan. 5 announcement, the New York Attorney General’s office announced the lawsuit, which allegedly involved defrauding more than 26,000 residents of the U.S. state out of billions of dollars worth of crypto. According to James, Mashinsky’s actions leading up to Celsius declaring bankruptcy contributed to investor losses by misrepresenting the platform’s financial condition and failing to personally register as required by state law.

“As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin,” said James. “The law is clear that making false and unsubstantiated promises and misleading investors is illegal. Today, we are taking action on behalf of thousands of New Yorkers who were defrauded by Mr. Mashinsky to recoup their losses.”

The lawsuit aimed to ban Mashinsky from “doing business in New York” in the future as well as pay damages, restitution, and disgorgement to affected Celsius investors.

This story is developing and will be updated.

Alex Mashinsky sued by NY AG for allegedly hiding Celsius’ ‘dire financial condition’

Alex Mashinsky’s actions leading up to Celsius declaring bankruptcy allegedly contributed to investor losses by misrepresenting the platform’s financial condition.

New York Attorney General Letitia James has filed a lawsuit against Alex Mashinsky, alleging the Celsius founder and former CEO made numerous “false and misleading statements” which led to investors losing billions. 

In a Jan. 5 announcement, the New York Attorney General’s office announced the lawsuit, which allegedly involved defrauding investors — including more than 26,000 residents of the U.S. state — out of billions of dollars worth of crypto. According to James, Mashinsky’s actions leading up to Celsius declaring bankruptcy contributed to investor losses by misrepresenting the platform’s financial condition and failing to abide by certain regulatory requirements.

“As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin,” said James. “The law is clear that making false and unsubstantiated promises and misleading investors is illegal. Today, we are taking action on behalf of thousands of New Yorkers who were defrauded by Mr. Mashinsky to recoup their losses.”

In addition to Mashinsky allegedly pushing a false narrative through appearances at conferences, on social media and in interviews, James said Celsius customers did not have the same protection as those at traditional financial institutions due to the platform not being subject to regulatory requirements. The lawsuit aimed to ban Mashinsky from “doing business in New York” in the future as well as having him pay damages, restitution and disgorgement to affected Celsius investors.

Related: Judge rules Celsius owns funds in Earn accounts, paving the way for stablecoin sale

Celsius filed for Chapter 11 bankruptcy in July 2022, leaving many crypto users with assets locked on the platform and a balance sheet gap in the billions. Mashinsky resigned as CEO in September, saying his role had become an “increasing distraction” amid users facing “difficult financial circumstances”.