Cryptocurrency Exchanges Binance, Kraken May Be Operating Unlawfully in New York: AG Report

cryptocurrency crime

New York State Attorney General Barbara Underwood has referred three major cryptocurrency exchanges to the state’s Department of Financial Services (NYDFS) for potential violations of New York’s virtual currency regulations. The exchanges referred are Binance, Gate.io, and Kraken. This was revealed in the Virtual Markets Integrity Initiative Report released earlier today by the Office of the New York State Attorney General (OAG).

The report details the concerns initially raised by the OAG about the operations of cryptocurrency exchange platforms, especially regarding security, internal controls, market surveillance protocols, and other relevant consumer and investor protections.

Cat and Mouse Game

Earlier in the year, CCN.com reported that the OAG sent out a letter with a 34-point questionnaire to 13 crypto exchanges, including some without active operations in New York, asking them to take part in its Virtual Markets Integrity Initiative aimed at fostering greater transparency into their operations. The 13 exchanges addressed were GDAX, Gemini, bitFlyer USA, Bitfinex, Bitstamp USA, Kraken, Bittrex, Poloniex, Binance, Tidex, Gate.io, itBit Trust Company, and Huobi.Pro.

binance cryptocurrency exchange
Binance, the world’s largest cryptocurrency exchange, maybe unlawfully operating in New York, the state’s attorney general’s office said in a new report.

Following the letter, Kraken CEO Jeff Powell responded with strong words, stating that the OAG’s demands showed “disrespect” and “entitlement,” and that the letter showed Kraken made the right call to “get the hell out of New York three years ago.” According to the OAG report, Binance, Huobi, and Gate.io also declined to participate in the initiative, stating that they do not allow trading from New York.

Per the report, the OAG then investigated whether in actual fact these platforms accept no trades from New York State, and based on the results of the investigation, it made the recommendation to forward Kraken, Binance, and Gate.io to the Department of Financial Services for a thorough investigation on the possible flouting of the state’s virtual currency laws.

‘Alarming Response’

In the document, the OAG bemoans the lack of regulation and supervision within the crypto exchange ecosystem, singling out Kraken for its “alarming” response to the initial letter.

An excerpt from the report reads:

“The OAG could not review the practices and procedures of non-participating platforms (Binance, Gate.io, Huobi, and Kraken) concerning manipulative or abusive trading. However, the Kraken platform’s public response is alarming. In announcing the company’s decision not to participate in the Initiative, Kraken declared that market manipulation “doesn’t matter to most crypto traders,” even while admitting that “scams are rampant” in the industry.”

In another significant move, the report also issued a direct warning to customers trading on the four non-participating exchanges, stating that the platforms may have received payment in exchange for listing digital assets, which should inform customers’ decisions to interact with them in any way.

Images from Shutterstock

Jonas Borchgrevink edited this article for CCN.com. If you see a breach of our Code of Ethics or find a factual, spelling, or grammar error, please contact us.

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David Hundeyin

David Hundeyin

I am a busy Nigerian writer, journalist and writer with an interest in tech and finance. When I'm not contributing to CCN and traveling around Africa, you can catch me contributing to CNN Africa, or in the writers room at 'The Other News', Nigeria's weekly answer to 'The Daily Show' with nearly 2 million viewers. My work on 'The Other News' was featured in the New Yorker Magazine, and that was then cited in the Washington Post so I'm not sure that counts as a feature but I'll definitely mention it too! I have been nominated by the US State Department to take part in the 2019 Edward R. Murrow Program for journalists under the International Visitors Leadership Program. I also like hamsters. You can reach me on Twitter at _David_Hundeyin

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