Cryptocurrency exchange KuCoin will pay a total of $22 million in fines and refunds, and cease operations in New York, to settle a lawsuit brought by the state’s Attorney General Letitia James, according to a stipulation and consent agreement filed on Tuesday.
KuCoin will pay a $5.3 million fine to the state and refund more than $16.7 million to New York users, according to the document, which was filed in the New York Supreme Court. James had accused KuCoin of operating as an unregistered securities trading platform.
KuCoin has agreed “to resolve without further litigation” claims that “KuCoin acted as an unregistered securities broker or dealer and commodities broker-dealer by offering, selling, and purchasing securities and commodities, including but not limited to the ETH, LUNA, and UST tokens and the KuCoin Earn product, within the State of New York,” the filing said.
“While engaged in the business of the sales of securities and commodities, KuCoin unlawfully represented itself as an ‘exchange’ in violation of the Martin Act, which are repeated and persistent illegalities,” the settlement added.
The Martin Act is a New York law that regulates securities transactions to protect consumers from fraud.
The move settles the lawsuit first filed in March 2023 by James, who has ratcheted up her policing of the crypto industry. In October, the NYAG filed suit against Digital Currency Group, Gemini Trust and Genesis Global for allegedly defrauding some 230,000 investors of over $1 billion. And in a June settlement of a lawsuit filed with the NYAG, trading platform CoinEx agreed to pay $1.1 million in refunds to New York users and $600,000 in penalties to the state.
The settlement is also the latest body blow for digital asset exchanges, coming less than a month after Binance, the world’s largest crypto exchange by trading volume, agreed to pay a $4.3 billion penalty for violating sanctions laws and operating as an unlicensed money transmitting business in a settlement with the U.S. Department of Justice.
KCS, the native token of KuCoin’s ecosystem, slid about 2.5% in the past hour to $12.94, although the token has been on a recent tear, rising 20.9% price over the past 24 hours and 109.5% in the past 30 days, according to CoinGecko data – as part of an overall surge in crypto markets.
Of the $3.5 billion in total assets in KuCoin’s on-chain wallets, roughly $667 million or about 19% are in KCS, data from blockchain analytics firm Nansen shows.
“Under our agreement, users required to retire from KuCoin will receive an email or SMS in about 10 days and onwards. If you don’t receive either of these, you’re alright. Rest assured – your asset security is always guaranteed and remains our top priority during this process,” wrote KuCoin CEO Johnny Lyu on X.
Lyu did not respond immediately to Unchained’s request for comment.