The New York Attorney General refers Binance and others to NYDFS over regulatory violations


The New York Attorney General (NY AG) has referred three cryptocurrency exchanges, including Binance and Kraken, to the New York Department of Financial Services, over the possibility that they have committed digital-currency regulatory violations. The referral is the result of a comprehensive investigation started by NY AG Barbara Underwood's predecessor, Eric Schneiderman in April, spanning two AGs and carrying significant weight and thoroughness. According to Underwood:

"New Yorkers deserve basic transparency and accountability when they invest – whether on the New York Stock Exchange or on a cryptocurrency platform. Yet, as our report details, many virtual currency platforms lack the necessary policies and procedures to ensure the fairness, integrity, and security of their exchanges. With this report, we hope to give New Yorkers the tools they need to make educated decisions on whether to entrust their money to a cryptocurrency platform and to help protect themselves against theft, fraud, and abuse.” 

The NY AG's report found a number of major areas of concern related to cryptocurrency exchanges. These include "abusive or manipulative trading" via bots or automated algorithms, conflicts of interests such as trading against clients and a failure to fully safeguard customer funds. The report found that 20% of Coinbase's volume involved the company's own prop trading, which is when "a firm or bank invests for its own direct market gain instead of earning commission dollars by trading on behalf of its clients," per Investopedia. The report is likely to cause ripples throughout the industry as consumers question the security, transparency, and stability of their cryptocurrency investments and assets in the hands of the largest exchanges in the world. (Sources: WSJ, NY AG)

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