One of the biggest crypto exchanges, KuCoin is set to pay $22 million to settle lawsuit and block New York customers from its platform. This news has shaken up the entire crypto market, but KuCoin remained steadfast and accepted its mistake to settle the lawsuit.
KuCoin could’ve opted to challenge the decision, but in order to remain one of the most reliable exchanges for users worldwide, they decided to pay the fine instead. This settlement will bring stability to the platform with no pending cases against it. The $22 million being paid is divided into two categories, which will be discussed below.
Let’s briefly discuss this news on KuCoin to pay $22 million to settle lawsuit and keep operating worldwide for users. Read on.
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Overview of the Lawsuit Against KuCoin
Attorney General Letitia James, in march, filed a lawsuit against KuCoin, alleging that it operated without proper registration in the state. The key focus of the allegations revolves around KuCoin’s failure to adhere to state regulations governing cryptocurrency transactions.
This lawsuit is part of a larger trend indicating increased regulatory scrutiny within the cryptocurrency space. Regulatory bodies, including the Attorney General’s office, have been taking legal actions against various crypto firms. The primary targets of these actions are issues related to fraud, money laundering, and inadequate investor protection.
The broader context suggests a concentrated effort by regulatory authorities to address and rectify challenges in the cryptocurrency industry. Instances such as the legal action against KuCoin highlight an ongoing commitment to ensuring compliance and safeguarding the interests of investors within the evolving landscape of digital assets.
Legal Charges on KuCoin
Attorney General Letitia James asserted that KuCoin violated the Martin Act, a consequential state securities law, by engaging in cryptocurrency transactions. The accusations encompass the sale of “KuCoin Earn”, a product designed to generate revenue for both the platform and its investors. Furthermore, KuCoin was alleged to have inaccurately labelled itself as an “Exchange”.
James emphasised that KuCoin facilitated the trading of popular digital currencies such as Ethereum (ETH), Terra (LUNA), and more. Notably, she pointed out that her regulatory action marked one of the initial instances where ETH was being classified as a security. Now KuCoin has to pay $22 million as settlement charges.
It isn’t the first time that James has gone after digital asset companies. Recently, in October, he filed a case against Digital Currency Group, Gemini, and Genesis. He also went after CoinEx in June and ended the case with a settlement of $1.7 million, after which the Hong Kong-based exchange departed from New York.
Measures Taken by KuCoin to End the Lawsuit – KuCoin to Pay $22 Million
After a long thought, KuCoin decided to accept the allegations, apologise, and KuCoin to pay $22 million to settle the lawsuit. The crypto exchange will refund $16.7 million to approximately 177,800 users based in New York. The remaining $5.3 million will go to the Attorney General and the state as a fine for operating illegally within their boundary.
KuCoin’s CEO, Johnny Lyu, took to X and confirmed the news. He said that the users based in New York impacted by this decision will be contacted via text or email in the next 10 days. As a follow-up post, the CEO warned the users about the rumours that might spread in the next few weeks. So, users are requested to follow the news on the official KuCoin’s website only.
This settlement wasn’t abrupt, as it came after the multi-million-dollar settlement by the U.S. Department of Justice against Binance and its former CEO, Zhangaong Chao. KuCoin followed in those footsteps and decided to get rid of it. It was a great decision, as KuCoin can now focus on more important things. Now KuCoin has to pay $22 million or else the Attorney and State will take strict actions against the exchange.
What Went Wrong for KuCoin?
KuCoin was once known for being privacy-friendly, letting users skip the usual ID checks, Know Your Customer (KYC), and financial rules like Anti-Money Laundering (AML). They only dealt with cryptocurrency, so there was no need for banking partners who usually insist on these rules.
If you had an unverified account, your withdrawals were limited to less than 5 Bitcoin (BTC), roughly $206,000 at the current price. For smaller withdrawals, KuCoin allowed users to trade without sharing personal info. This meant people from countries without KuCoin licences could join without being identified.
However, things changed on June 28. KuCoin said users now have to go through KYC procedures. They stopped taking deposits from unverified accounts and suspended services. However, withdrawals were still allowed. Now for this mistake which happened unknowingly, KuCoin has to pay $22 million which we have already discussed.
What About the Users Now?
KuCoin has agreed to take specific measures in response to the regulatory action, including the closure of accounts belonging to residents of New York within the next 120 days. Furthermore, the platform has committed to implementing measures to prevent New York residents from opening accounts in the future. You should also read the cryptocurrency regulations worldwide here.
As part of this agreement, KuCoin will restrict withdrawal access to a 30-day window, now allowing users to withdraw their funds during this period. The remaining 90 days will serve as a transitional period for users to complete the withdrawal process. In addition to that, users will be divided $16.7 out of the $22 that KuCoin will pay to the existing and old users.
KuCoin Facing the Regulatory Heat – KuCoin to pay $22 million to settle lawsuit
KuCoin, one of the exchanges under investigation, is accused of failing to comply with South Korea’s Financial Information Act. In response to these allegations, the FIU has recommended to the Korea Communications Commission the blocking of access to the websites and mobile applications associated with this platform.
Now, KuCoin is set to pay $22 million to settle the lawsuit. And after that, KuCoin can either opt to register itself within the state for its existing user base to exit the scenario completely and focus on other regions. Only time will tell more. If you’re interested in more crypto-related news like these, follow https://player.me/category/news/crypto/.