CoinEx, a popular cryptocurrency exchange platform, has been ordered by the US Securities and Exchange Commission (SEC) to cease its operations in the United States. The SEC alleges that CoinEx has been offering unregistered securities to US investors, violating the federal securities laws. According to the SEC’s complaint, CoinEx has been operating since 2017 and has attracted over 5 million users worldwide. The platform allows users to trade various cryptocurrencies, including Bitcoin, Ethereum, Litecoin, and its own native token, CET. The SEC claims that CET is a security that should have been registered with the SEC or qualified for an exemption.
The SEC further alleges that CoinEx has failed to implement adequate anti-money laundering (AML) and know-your-customer (KYC) procedures, exposing its users to the risk of fraud and illicit activities. The SEC also accuses CoinEx of making false and misleading statements about its regulatory status and compliance. The SEC’s order requires CoinEx to immediately stop offering and selling any securities in the US, and to provide notice to its US customers that they must withdraw their funds from the platform within 30 days. The order also imposes a civil penalty of $10 million on CoinEx and its founder and CEO, Haipo Yang.
CoinEx has not yet issued a public response to the SEC’s order. However, some users have expressed their frustration and disappointment on social media, while others have expressed their support and loyalty to the platform. It is unclear how CoinEx will handle the legal challenge and what impact it will have on its global operations. According to the NYAG, CoinEx failed to disclose important information to investors, such as the risks, fees, and conflicts of interest associated with its platform. The NYAG also claimed that CoinEx engaged in market manipulation and fraud by artificially inflating the prices and volumes of some tokens.
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In June 2023, CoinEx agreed to settle the lawsuit by paying $1.8 million and exiting the U.S. market. The settlement includes $1.17 millions of refunds to 4,691 investors, plus a $626,000 fine. CoinEx also agreed to be banned from offering, selling, or buying securities and commodities in New York, or making its platform available in the state. The settlement is a significant outcome for the NYAG’s efforts to crack down on illegal and unregulated crypto activities in the state. The NYAG has previously sued other crypto platforms, such as Bitfinex and Tether, for allegedly defrauding investors and manipulating the market.
The settlement also has implications for the broader crypto industry, as it shows that the SEC and other regulators are closely watching the activities of crypto exchanges and platforms. The SEC has recently sued Binance and Coinbase, two of the largest crypto platforms in the world, for operating as unregistered exchanges. The SEC’s chairman, Gary Gensler, has stated that many crypto tokens are securities and should comply with the federal securities laws. He has also called for more regulation and oversight of the crypto industry to protect investors and consumers.
The legal battle between CoinEx and the NYAG is an example of how crypto regulation is evolving and becoming more complex in the U.S. It also highlights the challenges and risks those crypto platforms face when operating in different jurisdictions. As the crypto industry grows and matures, it will likely face more scrutiny and enforcement actions from regulators around the world.
In a different twist, Binance exited the Netherlands. According to a notice posted on Binance’s website on June 16, 2023, no new users residing in the Netherlands will be accepted with immediate effect. Starting from July 17, 2023, existing Dutch resident users will only be able to withdraw assets from the Binance platform. No further purchases, trades or deposits will be possible. Binance said that it made this decision “in order to comply with local regulations and protect our users”. The exchange also thanked its Dutch customers for their support and understanding. Binance’s exit from the Netherlands is not an isolated case. The exchange has faced increasing regulatory scrutiny and pressure from various jurisdictions around the world, including the United States, Germany, Japan, Canada, Singapore and the United Kingdom.
The main issue that regulators have with Binance is its lack of compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) rules. As a VASP, Binance is required to implement adequate measures to prevent its platform from being used for illicit activities, such as money laundering, tax evasion, fraud and terrorism financing. However, Binance has been accused of operating without proper licenses and oversight, failing to conduct due diligence on its customers and transactions, and offering unregulated products and services, such as derivatives, leveraged tokens and stock tokens.
Binance has repeatedly denied any wrongdoing and claimed that it is committed to working with regulators and complying with local laws. The exchange has also taken some steps to improve its compliance standards, such as hiring former regulators and compliance experts, suspending some of its controversial products and services, and introducing mandatory identity verification for all users. However, these measures have not been enough to appease the regulators or prevent Binance from losing access to some of its key markets. The exchange’s future remains uncertain as it faces more legal challenges and regulatory hurdles.
For crypto users in the Netherlands, Binance’s exit means that they will have to find alternative platforms to buy, sell and trade cryptocurrencies. Fortunately, there are several other reputable and regulated crypto exchanges that operate in the Dutch market, such as Bitvavo, LiteBit, Kraken and Coinbase. These exchanges are registered with DNB as VASPs and comply with the Dutch AML/CTF Act. They also offer a variety of crypto products and services, such as spot trading, margin trading, staking, lending and custody.
However, crypto users should always do their own research before choosing an exchange and be aware of the risks involved in crypto trading. They should also follow the best practices for securing their crypto assets, such as using hardware wallets, enabling two-factor authentication and keeping backups of their recovery phrases.