‘Play by the rules or we will shut you down,’ says NY AG to crypto industry

Letitia James said her office was “sending a clear message to the entire industry.”

New York Attorney General Letitia James is advising members of the crypto industry and investors to stay vigilant against participating in or becoming a victim of illegal activities. 

According to the New York Attorney General’s office, James issued an alert to crypto investors today warning them to exercise “extreme caution when investing in virtual currencies.” She referred to cryptocurrencies as “high-risk, unstable investments that could result in devastating losses.”

James’ message included a warning to industry players that the AG would come down hard on firms skirting the law. She said that her office had “ended both Bitfinex and Tether’s illegal activities” in New York, a reference to the companies agreeing to pay the state $18.5 million in damages last week. As part of the settlement, the AG’s office will require Bitfinex and Tether to provide extensive reports on its finances and stop serving customers in New York.

“In the case of Tether, the company falsely represented that each of its stablecoins were fully backed, one-to-one, by U.S. dollars in reserve at all times,” said James. “Tether made false statements about the backing of the ‘tether’ stablecoin, and about the movement of hundreds of millions of dollars between the two companies to cover up the truth about massive losses by Bitfinex.”

The Attorney General added:

“We will not hesitate to take action against anyone who violates the law […] We’re sending a clear message to the entire industry that you either play by the rules or we will shut you down.”

Crypto investment platform Coinseed may be the next to face the AG’s regulatory wrath. The office filed a lawsuit against the firm last month for allegedly defrauding investors out of more than $1 million and selling a token that remains unlisted after more than three years. James said she aims to “shut down Coinseed’s fraudulent operation” by seeking restitution for investors, disgorgement with interest, permanent injunctions against the firm, and “the full closure of Coinseed’s business operations.”

Under current NY law, all crypto brokers, dealers, salespersons, and investment advisors must register with the AG’s Investor Protection Bureau if they are doing business in the state. Those without an exemption who fail to do so will be subject to civil and criminal penalties.