Attorney General Letitia James of New York has ordered two cryptocurrency exchanges to suspend business in the state immediately. Additionally to the two exchanges ordered shut, three more platforms were asked to submit information about their operations and products as soon as possible.
“Cryptocurrency platforms must follow the law, just like everyone else,” Attorney General James said. “Which is why we are now directing two crypto companies to shut down and forcing three more to answer questions immediately.”
Although the statement from the NYAG did not mention the firms, Bloomberg reported that Celsius Network LLC and Celsius Network LLC received a cease-and-desist letter and a request for more information respectively.
According to James, cryptocurrency exchanges that offer interest accounts with a return rate on virtual currencies put in them, are lending platforms. As a result, James claims that they must register or else they are aiding unlawful dealing in violation of the Martin Act. The Martin Act is widely regarded as one of the most stringent ‘blue sky’ regulations, which safeguard investors by making registration mandatory for all securities offerings and sales.
The Martin Act, which was passed in New York over a century ago, created a broad definition of what constitutes a security. “Any stocks, bonds, notes, evidence of interest or indebtedness or other securities…or negotiable documents of title, or foreign currency orders, calls or options therefore hereinafter called security or securities,” states the 1921 law.
These established kinds of instruments, according to James, are not exhaustive, implying that they can fit for new investments at any time. “The nature and function of the most common virtual currency lending products or services demonstrate that they fall squarely within any of several categories of a security under the Martin Act.,” she says.
The exchange, on the other hand, did not admit or deny any wrongdoing in relation to James’ allegations of concealing the loss of commingled client and corporate cash and lying about reserves.