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CoinEx ordered to return $1.7 million in lawsuit settlement

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CoinExThe United States Securities and Exchange Commission continues its crackdown on crypto as another exchange, CoinEx, recently received news of an imminent ban in New York.

According to New York Attorney General Letitia James, they recovered $1.7 million from the crypto exchange after it failed to register as a securities and commodities broker-dealer in the state.

More than $600,000 from the funds will be directed to cover the state-levered penalties, while a refund of $1,172,971.50 will be distributed among CoinEx investors. 

James stated that the settlement serves as a warning to crypto companies that fail to adhere to laws set in New York.

“Unregistered crypto platforms pose a risk to investors, consumers, and the broader economy,” she said.

“My office will continue to crack down on crypto companies that brazenly disregard the law, mislead investors, and put New Yorkers at risk.”

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The exchange

CoinEx, the Hong Kong-based crypto exchange, is a global cryptocurrency empire that provides users with a platform to trade digital currencies.

The company’s core team consists of members from renowned internet and finance establishments, some of which include the pioneers in cryptocurrency.

The team’s experience provides them with global operations and industry services knowledge.

CoinEx boasts an excellent user experience that is up to par with its trade matching system, giving global users a stable and efficient platform with high levels of security.

In February 2023, CoinEx was sued by James.

The Attorney General’s office alleged that the company engaged in repeated and persistent fraudulent practices, violating the New York Martin Act.

The Martin Act

The New York Martin Act is an anti-fraud law passed in 1921.

It grants the Attorney General broad law enforcement authority to undergo investigations regarding securities fraud.

The New York law is widely regarded as one of the most resilient anti-fraud laws throughout the country.

Since then, the Martin Act has been used frequently for high-profile cases, especially in the 2000s.

Although the law initially only covered physical currency, Attorney General Letitia James brought its application to virtual currencies to light in 2020.

In July of that year, a decision was made by a state appellate court linked to her lawsuit against BitFinex.

The Martin Act then deemed digital currencies as commodities under its terms.

BitFinex is another crypto exchange that caught James’ attention.

In April 2019, she accused the firm of disguising nearly $850 million in customer losses within its Tether reserves.

By February 2021, a settlement ordered BitFinex to cease business operations with New Yorkers.

Investigation & settlements

Letitia James’ office stated that an October 2022 investigation found CoinEx accounts could be created through New York-based IP addresses.

It also said affected investors would be refunded within 90 days through cryptocurrency or the cash equivalent of their holdings on the platform as of April 25, 2023.

With the settlement in place, CoinEx must geoblock New York IP addresses from its platform.

The firm is also ordered to ban US customers from creating new accounts.

Meanwhile, current US customers will receive an alteration on their accounts, allowing them to only withdraw funds from CoinEx.

The Martin Act allows James to ban CoinEx from operating within New York, but the firm is still authorized to operate in other states.

However, a spokesperson stated that while the law bans CoinEx from continuing business in New York, the settlement “codifies” the company’s decision to cease operations in the US.

Two days after the lawsuit was filed, a user shared a screenshot with the company’s explanation that it would terminate service for US users.

New York Attorney General Letitia James said the settlement is the latest in a suite of lawsuits her office filed against crypto firms.

In a press release, James revealed that her office collected over $500 million in fines from the actions.