N.Y.’s attorney general targets crypto lending

The New York state attorney general’s office is seeking to shut down unregistered cryptocurrency lending platforms.

The state AG’s office invoked New York’s investor protection law, the Martin Act, arguing that it captures crypto lending products and services under its broad definition of securities, in ordering two crypto platforms to stop operating in the state.

It also called on three other platforms to provide it with information about their activities.

“The virtual currency lending products at issue in today’s actions promise a fixed or variable rate of return to investors, and claim to deliver those returns by, among other things, trading with, or further lending those virtual assets,” the AG’s office said in a release. “The most common virtual currency lending products or services are therefore securities under the Martin Act.”

As a result, firms that offer crypto lending must be registered with the AG’s office as brokers, dealers or salespersons, it said.

“Cryptocurrency platforms must follow the law, just like everyone else, which is why we are now directing two crypto companies to shut down and forcing three more to answer questions immediately,” said state AG Letitia James in a release.

“My office is responsible for ensuring industry players do not take advantage of unsuspecting investors,” she said. “We’ve already taken action against a number of crypto platforms and coins that engaged in fraud or that illegally operated in New York. Today’s actions build on that work and send a message that we will not hesitate to take whatever actions are necessary against any company that thinks they are above the law.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.