NYDFS Shuts Down Virtual Currency Trading Firm

The New York State Department of Financial Services ("NYDFS") fined and delicensed a virtual currency trading firm for numerous compliance violations of New York State's Virtual Currency Regulation.

In a Consent Order, NYDFS stated that the company failed to (i) maintain effective anti-money laundering safeguards, (ii) provide adequate cybersecurity protections, (iii) ensure all consumer protection disclosures, (iv) limit user access privileges, (v) implement adequate policies and procedures on non-public information ("NPI") and (vi) comply with reporting and certification requirements. NYDFS also found that the company's risk assessment procedures were "weak and marginal" and that the company failed to properly supervise its third-party service providers' activities. NYDFS states that the deficiencies, found during two NYDFS examinations, violated the licensing requirements for "covered entities" pursuant to New York State's Virtual Currency Regulation.

To settle the charges, the company agreed to (i) pay an $8 million civil monetary penalty, (ii) not "claim, assert, or apply for a tax deduction" or insurance compensation as to the penalty and (iii) stop "all operations in New York State" and surrender its license to conduct virtual currency business activity.