Cryptocurrency exchange CoinEx has been sued by New York Attorney General Letitia James for allegedly conducting fraudulent practices and misrepresenting itself as an exchange by failing to register as a securities and commodities broker-dealer in the state.
CoinEx allegedly violated the state’s Martin Act, one of the most stringent anti-fraud and securities regulation laws in the US, by listing tokens such as Amp, LBRY Credits, Rally, and Terra, which were considered both commodities and securities. The Attorney General’s office created a CoinEx account and was able to trade on the platform using a New York-based computer and internet address.
Read More: Coinbase Agrees to a $100 Million Settlement with New York Regulators
CoinEx’s Non-Compliance
CoinEx failed to comply with a subpoena sent on December 22, 2022, to provide testimony concerning the virtual asset trading activities of its platform. CoinEx was also compelled to appear for an examination under oath on January 9, 2023, but failed to do so. The non-appearance was considered prima facie evidence that CoinEx engaged in fraudulent practices.
Legal Action and Its Consequences
The Attorney General’s office seeks a court order to prevent CoinEx from marketing itself as an exchange and operating in the state by ordering it to geoblock internet addresses and GPS location data originating from New York. The lawsuit also seeks restitution and damages for the victims of the fraudulent practices.
New York Attorney General Letitia James stated that “the days of crypto companies like CoinEx acting like the rules do not apply to them are over.” This lawsuit sends a strong message to other cryptocurrency exchanges and companies to comply with the state’s laws and regulations or face legal consequences.
