NEW YORK – New York Attorney General Letitia James has announced new efforts she said are intended to protect investors and markets by cracking down on exploitation of what her office is calling high-risk virtual currency schemes.
Virtual or cryptocurrency lending platforms in New York must register with the Office of the Attorney General (OAG) if they are operating within the state or offering their products to New Yorkers. James directed two of these lending platforms to immediately cease their unregistered and unlawful activities in New York and directed three other platforms to immediately provide information about their activities and products.
“Cryptocurrency platforms must follow the law, just like everyone else, which is why we are now directing two crypto companies to shut down and forcing three more to answer questions immediately,” said James. “My office is responsible for ensuring industry players do not take advantage of unsuspecting investors. We’ve already taken action against a number of crypto platforms and coins that engaged in fraud or that illegally operated in New York. Today’s actions build on that work and send a message that we will not hesitate to take whatever actions are necessary against any company that thinks they are above the law.”
The New York AG’s office explained that New York’s Martin Act sets forth a broad list of instruments that are declared to be securities and thus subject to its provisions.
Claims Challenged
“The nature and function of the most common virtual currency lending products or services demonstrate that they fall squarely within any of several categories of ‘security’ under the Martin Act.” The AG’s office said.
“The virtual currency lending products at issue in today’s actions promise a fixed or variable rate of return to investors, and claim to deliver those returns by, among other things, trading with, or further lending those virtual assets,” the AG’s office said. “The most common virtual currency lending products or services are therefore securities under the Martin Act, including, in particular, those that accept virtual currencies in exchange for a rate of return. As a result, entities offering such products from New York or to New Yorkers must be registered with the OAG as brokers, dealers, or salespersons, unless exempted.”