NY AG Launches Probe Of 13 Major Crypto Exchanges (Incl. Coinbase, Gemini)

Crytpocurrencies have been on the rise for last few days (perhaps, as tax-based selling pressure abates) but we suspect downside risk may increase again as WSJ reports NY AG Schneiderman contacts 13 crypto-exchanges, claiming that investors dealing in the fast-growing markets often don’t have the basic facts needed to protect themselves.

The Investor Protection Bureau of the Office of the Attorney General sent letters to the following virtual currency trading platforms:

(1) Coinbase, Inc. (GDAX);

(2) Gemini Trust Company;

(3) bitFlyer USA, Inc.;

(4) iFinex Inc. (Bitfinex);

(5) Bitstamp USA Inc.;

(6) Payward, Inc. (Kraken);

(7) Bittrex, Inc.;

(8) Circle Internet Financial Limited (Poloniex LLC);

(9) Binance Limited;

(10) Elite Way Developments LLP (Tidex.com);

(11) Gate Technology Incorporated (Gate.io);

(12) itBit Trust Company; and

(13) Huobi Global Limited (Huobi.Pro).

The full text of the letters sent to the trading platforms can be found below. The questionnaire is available here.

We write on behalf of the New York State Office of the Attorney General (“OAG”) to request the participation of [company] in OAG’s Virtual Markets Integrity Initiative, which seeks to protect the interests of New York residents who trade virtual currency and related investment products.[1] OAG is asking major virtual currency trading platforms (often referred to as “exchanges”) to respond to a questionnaire addressing key aspects of their operations, including their fee structure, their internal controls, and the measures they take to safeguard funds in customer accounts.[2] Through this Initiative, OAG seeks to increase transparency and accountability in the virtual currency marketplace—and better inform the actions of enforcement agencies, investors, and consumers in this space.

As you know, bitcoin, ether, and other virtual currencies have captured the imagination of millions of people worldwide. Representing a technological advance, a medium of exchange, and an investment opportunity all at once, virtual currencies are inspiring innovators, entrepreneurs, and investors—and are fueling an increasingly diverse ecosystem of companies and applications. But virtual currency is also a highly speculative sector, featuring significant volatility, instability, and risk. Moreover, published reports indicate the sector has attracted fraudsters, market manipulators, and thieves. As the State’s chief law enforcement agency, OAG is responsible for protecting consumers and investors from these bad actors and ensuring the fairness and integrity of New York’s financial markets.[3]  See, e.g., N.Y. Exec. Law § 63(12); N.Y. Gen. Bus. Law § 349; N.Y. Gen. Bus. Law § 352.

As with other emerging sectors, the challenge with virtual currency is to prevent fraud and other abuses, safeguard market integrity, and protect individual investors—without stifling legitimate market activity or innovation. OAG’s Virtual Markets Integrity Initiative seeks to advance these objectives by promoting meaningful transparency, accountability, and the opportunity for government agencies, consumer advocates, and investors to compare the policies, procedures, and protections of virtual currency platforms. Sophisticated investors routinely require privately-owned trading venues on which they are considering trading to furnish robust disclosures about their operations, policies, and internal controls so that they can evaluate the risks of trading on a given platform. The enclosed questionnaire asks [company] to supply similar information, for the benefit of not only professional investors and financial firms, but all consumers who may trade virtual currency on platforms, so that they better understand their operations and the associated risks.

The topics set forth in our questionnaire address fundamental aspects of your operations or issues that have already attracted significant public attention.  Indeed, many may be covered in your web disclosures or regulatory filings. They range from your platform’s basic trading rules, to the policies and safeguards you have implemented to prevent conflicts of interest, fraud, and illegality; address the operation of bots; and protection of customer assets from theft and other risks. We will review and assess your responses, compare them with those of other platforms, and disclose certain information in a publicly accessible format.[4] As part of this disclosure, we will identify any platforms that decline to provide meaningfully complete responses.

We kindly ask that you provide detailed and clear responses for each topic, as well as a contact from whom we can seek supplemental information, as necessary. Please complete the enclosed questionnaire and return your responses to our attention no later than May 1, 2018. In the event you have any questions or concerns, please do not hesitate to reach out to us.

Notably - for now - the markets are not affected...


The Wall Street Journal notes that the requests are part of New York Attorney General Eric Schneiderman’s initiative to bring transparency to an industry that prizes anonymity and lighter regulation than established securities and derivatives markets.

Mr. Schneiderman’s office said the program, called Virtual Markets Integrity Initiative,  is part of its responsibility to protect consumers and ensure the integrity of financial markets, and its goal is to ensure that investors can have a better understanding of the risks and protections afforded them on these sites.

It asked for the exchanges to respond to its questionnaire in full by May 1. The AG’s office plans to publish the information “in a publicly accessible format.”

The AG’s office isn’t the first New York regulator to address the issue of transparency in cryptocurrencies, which may explain the lack of reaction in crypto markets. The state’s Department of Financial Services began looking into regulation of cryptocurrency exchanges in 2014, an effort that culminated in a bitcoin-licence program organized by the state.


J S Bach Tue, 04/17/2018 - 12:50 Permalink

Notice how quickly these agencies scramble at the behest of their bankster bosses to quash competition?  Where have the AG's offices been in investigating the precious metal trading frauds over the past 10 years?  Limitless paper gold and silver have been appearing nightly suppressing actual supply & demand pricing.  Not a peep from any governing body.  Surely, there is fraud in cryptos... anything as baseless as they will germinate greed and corruption at unprecedented levels.  But, the precious metal scam has been going on for a decade now.   *crickets*

balanced gatorengineer Tue, 04/17/2018 - 14:17 Permalink

JS is exactly right. Federal regulators are nothing more than enforcers for the organized crime which masks itself behind this illusion of government.

I used to work for a finance company that became so successful (worth over 2 billion at one point) that the big banks decided they wanted the space. After the SEC failed to shut us down via multiple farcical "investigations", as we followed the letter of the law, the SEC simply threatened the process companies which did business with us until we could no longer do business.

If these exchanges have any sense, they will recognize this as recon preparation for the impending assault. Give these scumbags nothing.

In reply to by gatorengineer

tmosley J S Bach Tue, 04/17/2018 - 12:54 Permalink

Not really. Fraud is the norm in crypto right now.

Bitfinex and Tether are dead men walking at this point. Those that are operating under the color of law will probably be alright (Coinbase, Gemini, maybe others).

In reply to by J S Bach

Exponere Mendaces J S Bach Tue, 04/17/2018 - 18:20 Permalink

The ones that have to worry is GDAX/Coinbase for their BCash listing and insider trading pump scheme, followed closely by Bitfinex - who may be able to ignore it all, but I doubt it will be the last action taken against them.

The rest have been fully regulated, and the ones that aren't will find out really quickly what it means not to be compliant. All of this exchange bullshit is a phase in the overall adoption curve anyway, so it doesn't really matter in the long run.

When shit is priced in crypto and accepted in crypto - you don't need a fucking exchange. And its coming, believe me.

In reply to by J S Bach

tmosley Xibalba Tue, 04/17/2018 - 13:01 Permalink

What the fuck are you talking about? It was never a non-issue, it's just that everybody committing rampant in-your-face fraud in the sector thinks they are above the law. They got a subpoena last December, which implied they were under investigation, now there is another investigation.

You are exactly like the idiots holding Bitconnect after the second C&D order. EXACTLY.

Will be nice when this fraud flushes out of the market and I can get back in. Don't like holding dollars.

In reply to by Xibalba

Buckaroo Banzai tmosley Tue, 04/17/2018 - 13:52 Permalink

Lol stop. Bitconnect's appeal was precisely that it was a pyramid scheme. Anybody with an IQ over 110 who looked at it for longer than 5 minutes could tell exactly what it was, and act accordingly. Like any pyramid, the early adopters made a fortune, and the late adopters got left holding the bag.

Comparing Bitfinex to Bitconnect is ignorant.

In reply to by tmosley

Spaced Out Buckaroo Banzai Tue, 04/17/2018 - 15:18 Permalink

Lol, right, only he has too much emotional investment in it....remember in January he said "bitcoin will continue to fall in price until the tether issue is resolved". Well, the "tether issue" was a damp squib (i.e. unresolved), bitcoin is going up, but he can't accept that because it makes him look fucking stupid, yet again! Seriously, this retard has made so many emphatic predictions and not one of them has been correct. He drinks so much he forgets!

In reply to by Buckaroo Banzai

DillyDilly Tue, 04/17/2018 - 12:55 Permalink

So let's recap:


- 5 days ago ~ Soros & Rothschild talk positive about cryptos

- Cryptos jump from a $250B MC to $350B market cap

- AG of NY is now on the prowl




Next thing you know, Assad will be bombing Syria again, and Trump will be tweeting 'MISSION ACCOMPLISHED' after he 'succeeds' to land 32 out of 103 cruise missiles precisely into the dumpster they were aiming at.

weliveinamatrix Tue, 04/17/2018 - 13:01 Permalink

lol...anyway, I have mentioned this before..I went in late, mid-decemboer 2017..I lost half of it, but now I see it going back up...my 250 dollars went down to 110 dollars but now its at about 140 dollars. It will be interesting how this all turns out, and I gambled what I was willing to use just to be a part of it.  I still somewhat think that this was all planned for a future one world digital currency, but just like the internet, which they thought could control us, the patriots always find a way out of their trap..Maybe the same with crypto...It will be a vicious fight, guess we just wait and see what happens...