KuCoin agreed to pay $5.3 million and leave New York

New York Attorney General Letitia James announced a consent order with KuCoin on December 12, 2023 that required the cryptocurrency trading platform to pay $5.3 million to the state, return approximately $16.77 million in customer assets and end its New York operations.

The settlement mattered because it converted a state registration case against a large offshore platform into customer repayments, access restrictions and a permanent injunction. It also demonstrated the practical reach of New York’s securities and commodities laws: operating through foreign entities and an online platform did not prevent the state from imposing conditions when New Yorkers were being served.

The headline total combined two different obligations

The attorney general characterized the resolution as exceeding $22 million. That figure was not entirely a fine. KuCoin agreed to pay $5.3 million to the Office of the Attorney General within 30 days and return assets held for New York customers.

The consent order recorded KuCoin’s attestation that, as of November 29, 2023, approximately 177,800 New York customers held fiat currency or cryptocurrency with an approximate notional value of $16,766,642 on the platform. Because cryptocurrency prices fluctuate, that snapshot was not a guaranteed dollar payment, a measure of customer losses or a valuation fixed through the withdrawal period.

Customers were given 90 days from the order’s effective date to withdraw their assets directly. Assets remaining afterward were to be handled through a third-party fund administrator appointed by the state and paid for by KuCoin. The order also required weekly withdrawal notices during the 90-day period and daily notices during its final two weeks.

KuCoin accepted restrictions on its New York business

KuCoin admitted that it operated a cryptocurrency trading platform on which New York users could purchase or sell assets constituting securities or commodities under New York law. It also admitted that it was not registered in the state as a securities or commodities broker-dealer and had represented itself as an exchange without the required registration.

Under the settlement, KuCoin could not open new accounts for New York customers or accept additional investments and cryptocurrency deposits into existing New York accounts. Existing customers were limited to removing assets, and the platform was required to close the relevant accounts and terminate New York access within the order’s prescribed period.

The injunction permanently prohibited KuCoin and related entities from issuing, offering, exchanging, selling, promoting or distributing securities or commodities within or from New York. The order allowed KuCoin to seek modification or dissolution of that injunction following appropriate registration or licensing, with the attorney general’s agreement not to be unreasonably withheld.

KuCoin also had to implement controls addressing New York access and cooperate with timely law-enforcement requests for information and asset freezes. These provisions made the resolution an operational exit, not merely a monetary settlement.

The case began with a controlled purchase

The attorney general filed the underlying proceeding on March 9, 2023 after an investigator used a computer with a New York IP address to create an account and trade assets on KuCoin. The state’s petition alleged violations of the Martin Act and Executive Law Section 63(12), including unregistered brokerage activity and the offering of KuCoin Earn.

The March petition separately advanced the state’s view that ETH, LUNA and UST were securities or commodities. The December 12 settlement did not produce a federal court ruling classifying ether, resolve the status of every asset traded on KuCoin or register the company with the Securities and Exchange Commission or Commodity Futures Trading Commission.

What December 12 established

The verified event was narrower than a national prohibition: KuCoin accepted monetary, reimbursement and market-access obligations governing New York. Reuters and Axios contemporaneously corroborated the $5.3 million state payment, $16.7 million customer-asset component and withdrawal of service.

The order showed how a state could use registration and antifraud statutes to remove an offshore crypto intermediary from its market while creating a process for customers to recover property. It did not establish whether every customer would complete a withdrawal or how much the returned cryptocurrencies would ultimately be worth.