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New York Attorney General Sets Enforcement Sights on Cryptocurrency Platforms

  • New York AG Letitia James directed two cryptocurrency lending platforms to cease sales of unregistered virtual or cryptocurrency lending products, which allegedly violate New York’s Martin Act that is intended to protect the investing public, and ordered three other platforms that sell similar products to provide information about their activities and products.
  • The cease-and-desist letters allege that the two cryptocurrency lending platforms are serving as dealers, brokers, or salespersons of securities because their crypto-based products are openly available to New York residents and promise a fixed or variable rate of return to investors. The letters further note that dealing in bitcoin and other virtual currencies within New York without registration is also unlawful. The information-seeking letters request information about the three platforms’ products, clients, how cryptocurrency is handled by these platforms, due diligence policies and procedures, and agreements and contracts, among other things.
  • Cozen O’Connor State AG Practice Group Member Meghan Stoppel and Associate Keturah Taylor were quoted in a recent Banking Info Security article about AG James’s cryptocurrency-related enforcement actions, stating that the AG is sending a clear message that crypto companies are not above the law and noting that state AGs are frequently on the front lines of consumer protection issues arising with emerging technologies or industry disruptors.