KuCoin faces a lawsuit after New York State Attorney General, Letitia James, filed the measure on Thursday.
In a press release, she accused the cryptocurrency firm of violating securities laws, citing unregistered tokens as securities.
The regulator is the first to accuse Ether of becoming a security, despite the Commodity Futures Trading Commission (CFTC) consistently designating Bitcoin and Ether as commodities.
The regulator claims that the Martin Act allows regulators to designate Ether tokens as securities, allowing them to file criminal charges against violators.
The NYAG said in a statement, “KuCoin claimed to be an exchange, but is not registered with the Securities and Exchange Commission as a national securities exchange or appropriately designated by the [CFTC] as is required under New York Law.
“KuCoin also failed to comply with a subpoena issued by OAG to provide more information about its digital asset trading activities in the state. KuCoin has already been found to be operating without proper licensure in multiple jurisdictions including the Seychelles, Canada, and the Netherlands.”
Shortly after the NYAG publicised the lawsuit, ETH dropped 8 percent, with other cryptocurrencies following suit.
The statement also argues that KuCoin Earn, the platform’s staking and cryptocurrency lending offering, allowed NYAG to create a KuCoin account with a New York IP address. The exchange allegedly charged a fee for buying and selling tokens, as well as depositing tokens on the KuCoin Earn scheme.
James hopes to receive a court order to block KuCoin from holding exchange status and block the firm from trading in New York. The office also plans to geo-block KuCoin and block access to its apps and services.
The news comes after the NYAG launched further measures against Nexo, Celcius, CoinEx for allegedly offering unregistered securities to customers.
