NY Attorney General Warns Three Crypto Exchanges May Be Breaking the Law

The Attorney General of New York State Barbara Underwood has referred Gate.io, Binance and Kraken to the New York Department of Financial Services (NYDFS) for investigation of possible violations of state laws on virtual currencies.

This was revealed in a new report on the Virtual Markets Integrity Initiative released by the Office of the New York State Attorney General (OAG) on September 18.

OAG Warns Consumers

According to the new OAG report, the decision was made to recommend Kraken, Gate.io and Binance to the NYDFS for possible prosecution following an investigation into claims that they facilitate crypto trading within New York State.

The report lists out the OAG’s cryptocurrency exchange platform concerns including a near-total lack of oversight and regulation, a lack of protection from abusive trading practices, and limited safeguarding of users’ funds.

In particular it warns that listing of assets on crypto exchanges is a process that is shrouded in secrecy with little or no information available as to how the decisions are made.

Going further, the report takes the unusual step of directly recommending that customers avoid the mentioned crypto exchange platforms. It mentions a news article purportedly showing that initial coin offering (ICO) promoters are able to pay to get their tokens listed, which means that consumers trading on the listed exchanges are at higher risk of making losses.

In a statement, Underwood added:

New Yorkers deserve basic transparency and accountability when they invest – whether on the New York Stock Exchange or on a cryptocurrency platform. Many virtual currency platforms lack the necessary policies and procedures to ensure the fairness, integrity, and security of their exchanges.

Virtual Markets Integrity Initiative

Earlier this year, the OAG sent out a letter to 13 major crypto exchanges including Coinbase, Poloniex, Huobi, Bitfinex, Kraken, Gate.io, Binance, GDAX, BitStamp, Gemini, Tidex, Bittrex and iBit Trust Company, as part of the Virtual Markets Integrity Initiative. The letter listed out 34 questions for each exchange to answer with the goal of increasing crypto exchange transparency and improve user security.

While nine of the exchanges responded positively, Huobi, Binance, Kraken and Gate.io indicated they do not accept trades from New York and hence are not subject to the OAG’s jurisdiction.

Kraken, in particular, did not pull its punches, with CEO Jesse Powell describing the move as “insulting”, and proof that the exchange made the right decision to leave New York and set up in California in 2015.