New York Sued CoinEx Crypto Exchange for Violation

The New York Attorney General has sued crypto exchange CoinEx seeking court to ban the exchange from operating in New York, United States, and block all internet addresses as per Twitter posts. 

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

The allegation was raised by the New York Attorney General Letitia James, who argued that the crypto exchange has failed to register as a securities and commodities broker-dealer in the state despite the purported claim that it was registered. 

The 38-page petition filed by James in the New York Supreme Court on Feb. 22 stated that CoinEx engaged in an outlandish and repeated fraudulent practice, which outrightly violated the state’s Martin Act.

The Martin Act was considered one of the most strict anti-fraud and securities regulation laws in the United States, which any financial institution must strictly comply with. 

According to Letitia James, 

“When crypto platforms disregard our laws, they put New Yorkers at risk. We are seeking to stop coinexcom from operating in New York and will continue to protect people from the dangers of the cryptocurrency industry.”

When crypto platforms disregard our laws, they put New Yorkers at risk.

We're seeking to stop @coinexcom from operating in New York and will continue to protect people from the dangers of the cryptocurrency industry.

— NY AG James (@NewYorkStateAG) February 22, 2023

James further stressed that CoinEx listed a number of tokens that should be classified as both commodities and securities. 

However, she argued that CoinEx is not registered with the Securities and Exchange Commission (SEC) as well as Commodity Futures Trading Commission (CFTC) as stipulated by the New York law. 

Before raising the allegation, James created a CoinEx account with a New York-based computer and internet address and was successfully able to complete transactions on the exchange. 

Background Leading to CoinEx Prosecution

It is noteworthy that the prosecution of CoinEx platform predates today as it was reportedly served with a subpoena on Dec. 22 by the New York Attorney General’s office, which was subsequently declined. 

James argued that:

“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 recent times, crypto exchanges have witnessed increasing clampdowns following the regulatory decisions by the US SEC. It appears that CoinEx is the latest to be at the receiving end.