Damning cryptocurrency report from New York Attorney General, three platforms “potentially operating unlawfully in New York”

13 cryptocurrency trading platforms were asked for voluntary assistance in a new report from New York’s Attorney General. Not all of them agreed to take part…

The Attorney General of New York state, Barbara D Underwood, has published a new report entitled the Virtual Markets Integrity Initiative. And it doesn’t make good reading for cryptocurrency exchanges, nor for customers of them. The 33 page document, with appendices on top, was compiled “to protect and inform New York residents who trade in virtual or ‘crypto’ currency”.

You can find the full document here.

The report examined 13 cryptocurrency exchanges (who were asked to engage with the compilation of it on a voluntary basis), and took issue with the protection that their customers were being offered against fraud. It argues on its first full page that these exchanges “have not registered under state or federal securities or commodities laws. Nor have they implemented common standards for security, internal controls, market surveillance protocols, disclosures, or other investor and consumer protections”.

It thus concludes that customers face “significant risks”, noting that different trading platforms have reacted to these risks differently. Its key findings talk about “illusory” protections for customer funds, a lack of clampdown on abusive trading activity, and conflicts of interest for trading platforms.

Furthermore, it raises questions about jurisdiction, citing that “the jurisdiction where a platform is incorporated or headquartered may dictate whether and how the customer can seek compensation or other legal recourse in the event his or her data is breached, customer funds are stolen, or a platform becomes insolvent”.

It noted too that some platforms “refused to respond”, citing Binance, Gate.io, Huobi and Kraken, noting that these are located outside of the United States, but conversely the report couldn’t be clear exactly where Gate.io is actually sited. Kraken in particular was dismissive of the report when it was invited to respond. The report was particularly scathing towards it, too, noting – in a special blue box, no less – that “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.

Action is going to be forthcoming as a result of the report. Barbara Underwood confirmed on her Twitter feed that she’s referring Binance, Gate.io and Kraken to the New York State Department of Financial services, for “possibly operating unlawfully in New York”.

We’ll keep you posted as those investigations progress.

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