Published: Fri, September 21, 2018
Economy | By

Binance and Kraken May Be Operating Illegally in NY State

Binance and Kraken May Be Operating Illegally in NY State

As a result of the findings, the attorney general asked New York's Department of Financial Services (NYDFS) to review whether three exchanges might be operating unlawfully in the state.

In April, now former New York Attorney General Eric Schneiderman prompted 13 cryptocurrency exchanges to provide information on their operations, safeguards against market manipulation and fraud, internal control, and so forth. According to the well-established regulator, a minimum of three crypto exchanges can be facilitating operations that would be classified as illegal in the state of NY, which has become notorious for its heavy-handed regulatory moves.

Of the nine participants, four platforms - Binance,, Huobi Global and Kraken stated that they do not permit trading from New York State and denied participation.

Published Sept. 18, the Virtual Markets Integrity Report focuses on the outcome of the Virtual Markets Integrity Initiative, which conducted an investigation into the policies and practices of cryptocurrency trading platforms and the level of compliance they adhere to within the state's cryptocurrency regulation framework. "We the people should be able to decide if these platforms are too risky or problematic, it's our money at stake".

The question of market integrity has become one of the key issues surrounding the development of cryptocurrencies. The Securities and Exchange Commission has consistently rejected applications for bitcoin-based exchange-traded funds, concluding there isn't enough transparency to be confident that prices aren't being manipulated.

New York Says Three Crypto Exchanges May Be Breaking the Law

"Virtual asset trading platforms have yet to implement serious efforts to monitor and stop abusive or manipulative trading", continued Underwood.

In addition, the platform pointed out that the report by the Attorney General was published a day before the expiration of the CBOE futures contract. "Few platforms seriously restrict, or even monitor, the operation of "bots" or automated algorithmic trading on their venue".

The NY AG notes that all of the platforms that voluntarily provided data to the Virtual Markets Integrity Initiative use IP tracking methods to control access, but only BitStamp and Poloniex block masked VPN/IP addresses. "Only conclusion we can make at this time is that they might be engaged in unlawful activity", Kraken wrote, adding that while it had "no direct evidence" of insider trading the lack of response raises "red flags", apparently poking fun at a Bloomberg reporter who had used that term in reference to Kraken. Each of those exchanges had earlier refused to provide information requested by the state.

The study also found that "trading platforms lack a consistent and transparent approach to independently auditing the virtual currency purportedly in their possession", making it "difficult or impossible" to confirm that the exchanges are responsibly holding customer accounts.

"Customers would do well to avoid platforms that can not satisfactorily answer the question posed in this report", it said.

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