KuCoin is one of the world’s largest cryptocurrency exchanges. In March of this year, the New York Attorney General (“AG”) sued KuCoin, accusing it of failing to register with the state before letting investors buy and sell cryptocurrencies on its platform. According to the AG, an investigator from the AG’s office was able to create an account with KuCoin using a computer with a New York-based IP address to buy and sell cryptocurrencies, including popular tokens…
The New York State Department of Financial Services (DFS) views itself as the leading cryptocurrency state regulator in the country. Its regulatory scheme began with its introduction of the BitLicense, a set of regulations that prohibited companies from engaging in “virtual currency business activity” in New York, or with New York residents, without a license. Very few were actually applied for, and fewer still issued. Much has been written about how this regulatory environment has stymied…
Following a host of notable bankruptcy filings in the digital asset industry, the New York State Department of Financial Services (DFS) recently issued guidance (the DFS Guidance) to emphasize sound custody and disclosure practices for firms providing digital asset custody services to better protect customers in the event of an insolvency or similar proceeding. While the Guidance applies only to DFS-regulated digital asset firms, it picks up on a common concern from other U.S. regulators,…
On November 23, 2022, New York Governor Kathy Hochul signed legislation that imposes a two-year moratorium on certain crypto-mining operations that run on carbon-based power sources. The “Purpose or General Idea” portion of the legislation provides: To establish a moratorium on air permit issuance and renewal for electric generating facilities that utilize a carbon-based fuel and that provides, in whole or in part, behind-the-meter electric energy consumed or utilized by cryptocurrency mining operations that use…
The court in LCX AG v 1.274M US Dollar Coin et al, No. 156444/2022 (N.Y. Sup. Ct Aug, 22, 2022) stated that its decision was one of first impression. Plaintiff LCX is a virtual asset service provider in Liechtenstein. It alleged that approximately $8 million worth of virtual assets, all based on the Ethereum blockchain, were wrongfully taken on January 8, 2022. The case was initiated when the stolen funds, stored in Ethereum Wallets 0x29875…
In the wake of last month’s collapse of the TerraUSD token, a broad array of regulators and government officials have attempted to introduce a legal framework around stablecoins. Recently, Japan passed comprehensive legislation around the issuance of stablecoins. In the United States, Senators Lummis (R-WY) and Gillibrand (D-NY) recently introduced a bill into the US Congress that would, among other things, set requirements for the amount of backing assets stablecoin issuers would be required to…
This is an update to our previous posts about the cases that the SEC and New York State Attorney General brought against Coinseed, a company that purported to offer a mobile investment application that enabled users to invest in digital assets. On September 13, 2021, the NY Attorney General announced that her office had obtained a judgment permanently enjoining Coinseed’s operations. It was a default judgment. According to the AG, after a preliminary injunction had…
The New York State Department of Financial Services (DFS) is the department of the New York state government responsible for regulating financial services and products, including banking and financial services firms. On July 29, 2021 DFS Superintendent Linda A. Lacewell announced new action by DFS to promote diversity, equity and inclusion in the banking and non-depository financial industries. In the industry letter to New York-regulated banking institutions and New York-regulated non-depository financial institutions, DFS outlined its…
One of the byproducts of the initial coin offering craze was class action lawsuits that alleged that the underlying tokens were securities and that the securities law were violated because the offerings for those alleged securities did not comply with the securities laws. The US Securities and Exchange Commission continues to pursue cases for the improper sale of unregistered tokens. Not surprisingly, with the recent advent of the popularity of NFTs (non fungible tokens), a…
In February, we reported that both the U.S. Securities and Exchange Commission and the New York Attorney General had brought proceeding against Coinseed, a company that purported to offer a mobile investment application that enabled users to invest in digital assets. On May 7, 2021, the AG’s office filed a motion asking the court for a temporary restraining order, a preliminary injunction, and the appointment of a receiver to immediately block Coinseed and its CEO from…