NY AG is suing KuCoin for selling securities and commodities without registration

New York State Attorney General Letitia James has announced that she has filed a lawsuit against cryptocurrency exchange KuCoin after being able to buy and sell crypto on the exchange, which is not registered in New York. “This action is one of the first times a regulator has alleged in court that ETH, one of the largest cryptocurrencies available, is a security,” her office said in a statement.

The complaint, filed March 9 in the New York County Supreme Court, alleges that Seychelles-based KuCoin violated securities laws when it “sold, offered to sell, bought, and offered to buy cryptocurrencies containing commodities and securities are”. New Yorkers, without being registered with the Attorney General’s Office.

In addition, KuCoin allegedly issued and sold its KuCoin Earn product, which the complaint alleges is a security, without registering as a stock broker or dealer. It also claims that KuCoin misrepresented itself as an exchange as it lacked registration for that feature as well.

Related: The Dutch central bank says KuCoin is unlicensed and ‘offering services illegally’

The lawsuit stated that “under both state and federal authority, ETH, LUNA, and UST are commodities” under the state’s Martin Act, and KuCoin applied to register as a commodities broker. The suit went on to say that “ETH, LUNA, UST and KuCoin Earn are each securities under Waldstein– a test established by the New York Supreme Court of Albany County in 1936 – as well as under the Howey test. Further:

“The Howey test applies to the tokens, as exemplified by the recent federal authority.”

The lawsuit specifically cites the SEC v. LBRY case to support that claim. It is seeking a permanent injunction against KuCoin “selling and buying securities and commodities to and from New Yorkers.” In addition, it asks the court to require an accounting of all New Yorkers who took advantage of the exchange and squandering of funds ill-gotten from New Yorkers.

This is James’ “eighth move to rein in shady cryptocurrency platforms,” ​​her statement said.