Blockchain Legal Resource

On September 13, 2021, New York Attorney General (NYAG) Letitia James announced the entry of a default judgment against crypto platform Coinseed and its CEO. The default judgment includes broad injunctive relief against Coinseed’s future operations in New York state. The case is one of many that regulators have recently brought against crypto trading platforms.

As we have previously reported, the New York Attorney General has been in protracted litigation to enforce an investigative subpoena under New York’s expansive Martin Act against cryptocurrency exchange Bitfinex and its affiliated companies that issue the Tether stablecoin. On February 23, 2021, the Attorney General announced a definitive settlement of the matter.

As we previously reported, for over a year the New York Attorney General has been seeking to enforce an investigative subpoena under New York’s expansive Martin Act against cryptocurrency exchange Bitfinex and its affiliated companies that issue the Tether stablecoin. Bitfinex and its affiliates have raised a number of procedural challenges to the NYAG’s authority to conduct its investigation.  In a case addressing important issues about the scope of the NYAG’s investigative authority over cryptocurrency businesses, a New York appellate court on July 9, 2020, rejected Bitfinex’s challenges and authorized the NYAG investigation to proceed.

As we first reported in April, the New York Attorney General has been locked in a complicated dispute with a virtual currency exchange operator over the authority of the Attorney General to investigate its activities.  In its defense in court proceedings, the crypto exchange asserted that the Attorney General lacked both personal jurisdiction and subject matter jurisdiction over it because of its efforts to avoid doing business in New York state.  In a ruling ultimately siding with the Attorney General, a New York trial court on August 19 permitted the regulatory investigation to continue.  The judge’s opinion underscores the difficulty faced by crypto entrepreneurs seeking to avoid contacts with U.S. customers in order to avoid the jurisdiction of U.S. courts and regulators.

On April 25, 2019, the New York Attorney General announced that it had obtained a court order enjoining iFinex Inc. (operator of the Bitfinex digital asset trading platform), Tether Limited (issuer of the “tether” stablecoin) and their affiliated entities from further violations of New York law in connection with ongoing activities that the Attorney General alleges may have defrauded New York investors that trade in virtual currencies. The Attorney General’s investigation focuses on the potential loss or dissipation of over $850 million in customer funds. Bitfinex subsequently issued its own statement denying the Attorney General’s claims and insisting that “we have been informed that these... amounts are not lost but have been, in fact, seized and safeguarded” by unnamed parties.