Cryptocurrency

The Office of the New York State Attorney General (OAG) is the state securities and commodities regulator for the state of New York, which includes cryptocurrency.

Cryptocurrencies are subject to extreme and unpredictably high price swings that make them among the most high-risk investments on the market. The OAG has taken several enforcement actions against major cryptocurrency platforms and broker-dealers.

OAG enforcement actions

• New York State Attorney General James sued cryptocurrency platform KuCoin for failing to register as a securities and commodities broker and falsely representing itself as a marketplace.
• Attorney General James brought action against cryptocurrency platform CoinEx for failing to register as a securities and commodities broker.
• Attorney General James and a multistate coalition recovered $24 million from cryptocurrency platform Nexo for operating illegally. In addition, the coalition sued the former CEO of cryptocurrency platform Celsius for defrauding investors and concealing the company’s dire financial condition.
• Attorney General James reached a nearly $1 million settlement with cryptocurrency platform BlockFi Lending LLC for offering unregistered securities.
• Attorney General James shut down the cryptocurrency-trading platform Coinseed, and secured a permanent injunction and receiver to protect investors' funds by preventing the company from further unauthorized trading.

• Attorney General James secured nearly half a billion dollars from GTV Media Group and Saraca Media Group, two media companies that sold cryptocurrencies, for failing to register in New York state.
• Attorney General James shut down illegal trading on cryptocurrency platforms Bitfinex and Tether through an agreement that included $18.5 million in penalties.

Cryptocurrency investment risks

To protect New Yorkers from this extreme volatility, Attorney General James offers New Yorkers guidance on the various risks associated with cryptocurrencies.

The virtual currency market exposes investors to dangerous risks, such as wild price swings and potential losses due to hacking, fraud, or theft. Investors in virtual assets should beware of the many significant risks of investing in these products including:

• Highly speculative and unpredictable value: Easy to create, virtual currencies spread through the market quickly. Their underlying value is not backed by real assets and can behave unpredictably. Prices can swing wildly, and crash without warning or regard to any changes in the real economy. Price fluctuations can be driven by market hype on social media platforms.

• Difficulty cashing out investments: There is no guarantee that you will be able to liquidate your investments when you want — such as when the crypto markets begin to crash. During times of crisis, trading platforms may halt trading or claim to experience technical difficulties, preventing you from accessing your assets.
• Higher transaction costs: Some trading platforms charge fees on transactions, such as transferring funds and withdrawing money. These fees can vary, depending on the size of the transaction and overall trading volume. You could end up paying a steep price to access your assets when you need them the most.
• Unstable “stablecoins:” Despite their misleading name, stablecoins offer no guarantee of protection against losing value. While stablecoins claim to be tied to real assets, like real currency, their value is sometimes controlled simply by algorithms You can run large risks by holding stablecoins.
• Hidden trading costs: Value in cryptocurrencies and other virtual assets may be propped up by automated trading. For example, bots could be programmed to spot when another trader is trying to make a purchase, and buy before the trader can complete their purchase. This practice can push up the price of the virtual asset and cost you more to purchase it.
• Conflicts of interest: Many operators of virtual-currency trading platforms are themselves heavily invested in virtual currencies, and trade on their own platforms without oversight. Their financial interests may conflict with yours — for example, if they buy and sell to enrich themselves and impoverish you. In addition, some large investors receive favorable treatment, such as private cash-outs that are invisible to the public.

• Limited oversight: There are no federally regulated exchanges, like the New York Stock Exchange or Nasdaq, for virtual currencies. Virtual-currency trading platforms operate from various places around the world that U.S. law enforcement may not be able to access. Many platforms have little or no oversight. If you are defrauded on one of these exchanges, U.S. regulators and law enforcement will probably be unable to help you. In addition, many cryptocurrency issuers are not regulated, and do not have to keep a certain amount of capital on hand to pay investors. So, if lose money trading a certain cryptocurrency, you may have no way to get your money back from the issuer.